In a dynamic optimising model with costly tax collection, a tax cut by one nation creates positive externalities for the rest of the world if initial public debt stocks are positive. By reducing tax collection costs, current tax cuts boost the resources available for current private consumption,...

The paper develops a two-country endogenous growth model to investigate possible causes for the existence and persistence of productivity growth differentials between nations despite a common technology, constant returns to scale and perfect international capital mobility. Private consumption is...