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The redistribution of trade gains and the equity-efficiency trade-of

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  • Marco de Pinto

    ()
    (University of Trier)

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    Abstract

    The contribution of this paper is to derive an optimal redistribution scheme for trade gains in the case of a governments objective function that explicitly accounts for the equity-efficiency trade-o¤. The government pays unemployment benefits (UB) either .financed by a wage tax, a payroll tax or a pro.t tax paid by exporters only. Using a Melitz -type framework with unionized labor markets and heterogeneous workers we show that there is a clear-cut ranking of the redistribution schemes in terms of welfare level: 1. UB .financed by a pro.t tax paid by exporters, 2. UB .financed by a wage tax, 3. UB .financed by a payroll tax.

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    File URL: https://www.uni-marburg.de/fb02/makro/forschung/magkspapers/44-2012_de_pinto.pdf
    File Function: First version, 2012
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    Bibliographic Info

    Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201244.

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    Length: 41 pages
    Date of creation: 2012
    Date of revision:
    Publication status: Forthcoming in
    Handle: RePEc:mar:magkse:201244

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    Related research

    Keywords: trade liberalization; heterogeneous firms; trade unions; income inequality; unemployment benefits; taxes;

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