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Evaluating Tax Reforms in a Monetary Economy

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  • Wen, J.F.
  • Love, D.R.F.

Abstract

Hypothetical revenue-neutral tax reforms are conducted in a calibrated endogenous growth model in which money serves to economize on the time-costs of transacting. The model includes the cash-in-advance (CIA) and non-monetary frameworks as special cases of the parameterization. The results of our `shopping-time' model suggest that both the CIA and non-monetary models may underestimate the welfare benefits of lowering the wage tax, while the growth effects of the tax reforms are the same across the models. We also examine the transitionary dynamics resulting from the tax reforms.

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Bibliographic Info

Paper provided by Wilfrid Laurier University, Department of Economics in its series Working Papers with number 96005.

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Length: 22 pages
Date of creation: 1996
Date of revision:
Handle: RePEc:wlu:wpaper:96005

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Keywords: TAX POLICY ; ECONOMIC GROWTH ; ECONOMIC MODELS;

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References

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  16. Paul Gomme, 1991. "Money and growth revisited," Discussion Paper / Institute for Empirical Macroeconomics 55, Federal Reserve Bank of Minneapolis.
  17. Michael B. Devereux & David R. F. Love, 1994. "The Effects of Factor Taxation in a Two-Sector Model of Endogenous Growth," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 509-36, August.
  18. Thomas F. Cooley & Gary D. Hansen, 1991. "The welfare costs of moderate inflations," Proceedings, Federal Reserve Bank of Cleveland, pages 483-518.
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Cited by:
  1. Amedeo Argentiero & Michele Bagella & Francesco Busato, 2008. "Money laundering in a two-sector model: using theory for measurement," European Journal of Law and Economics, Springer, vol. 26(3), pages 341-359, December.

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