Optimal Tax-Subsidy Policies for Industrial Adjustment to Uncertain Shocks
AbstractThis paper analyzes the role of government policy when random shocks affect particular industries, occupations, or regions. Workers can freely choose an industry or occupation ex ante, and can relocate, but only at a cost, once uncertainty is resolved. The policy instruments available to the government are per capita taxes and subsidies. These are chosen either to maximize ex post utilitarian aggregate welfare, treating the initial assignment of workers as exogenously fixed (ex post optimal policy), or to maximize the ex ante expected utility of a representative workers, taking the effect of policy choice on the ex ante allocation of labor into account (ex ante optimal). Ex ante and ex post optimal policies are compared, with or without institutional constraints on the set of instruments. Optimal policies range from complete equalization of net incomes across workers to no equalizing transfers at all depending on the instruments available and the nature of relocation costs. Copyright 1990 by Royal Economic Society.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 42 (1990)
Issue (Month): 1 (January)
Contact details of provider:
Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Fax: 01865 267 985
Web page: http://oep.oupjournals.org/
Other versions of this item:
- BOADWAY, Robin W. & WILDASIN, David E., . "Optimal tax-subsidy policies for industrial adjustment to uncertain shocks," CORE Discussion Papers RP -889, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Hans-Werner Sinn, 1995.
"Social Insurance, Incentives, and Risk Taking,"
NBER Working Papers
5335, National Bureau of Economic Research, Inc.
- Linda Andersson, 2008. "Fiscal Flows and Financial Markets: To What Extent Do They Provide Risk Sharing within Sweden?," Regional Studies, Taylor & Francis Journals, vol. 42(7), pages 1003-1011.
- Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
- Motohiro Sato, 2000. "Fiscal Externalities and Efficient Transfers in a Federation," International Tax and Public Finance, Springer, vol. 7(2), pages 119-139, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.