Distortionary taxation, international business cycles and real wage: explaining some puzzling facts
AbstractIn this paper, we show that fluctuations in distortive taxes can account for most puzzling features of the U.S. economy. Namely, the observed real wage rigidity, the international correlation of investment and labor inputs, and the so-called quantity puzzle (according to which cross-country correlation of outputs is higher than the one of consumptions). This is done in a two-country search and matching model with fairly standard separable preferences, extended to include a tax/benefit system.
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Bibliographic InfoPaper provided by Universidad de Guanajuato, Department of Economics and Finance in its series Department of Economics and Finance Working Papers with number EC201002.
Length: 30 pages
Date of creation: Aug 2010
Date of revision:
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Distortive taxes; real wage rigidity; international business cycles; search; matching;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-03 (All new papers)
- NEP-BEC-2010-09-03 (Business Economics)
- NEP-DGE-2010-09-03 (Dynamic General Equilibrium)
- NEP-MAC-2010-09-03 (Macroeconomics)
- NEP-OPM-2010-09-03 (Open Economy Macroeconomic)
- NEP-PUB-2010-09-03 (Public Finance)
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