Arbeitspapier
Unilateral Tax Policy in the Open Economy
This paper examines the effects of a unilateral reform of the redistribution policy in an economy open to international trade. We set up a general equilibrium trade model with heterogeneous agents allowing for country asymmetries. We show that under international trade compared to autarky, a unilateral tax increase leads to a less pronounced decline in aggregate real income in the reforming country, while income inequality is reduced to a larger extent for sufficiently small initial tax rates. We highlight as a key mechanism a tax-induced reduction in the market size of the reforming country relative to its trading partner, resulting in a firm selection effect towards exporting. From the perspective of a non-reforming trading partner, the unilateral redistribution policy reform resembles a unilateral increase in trade costs leading to a deterioration of terms-of-trade and a decline in both aggregate real income and inequality.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 9296
- Klassifikation
-
Wirtschaft
Personal Income, Wealth, and Their Distributions
Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
Trade and Labor Market Interactions
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- Thema
-
income inequality
redistribution
international trade
heterogeneous firms
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Kohl, Miriam
Richter, Philipp M.
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2021
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Kohl, Miriam
- Richter, Philipp M.
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2021