IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v20y2009i1p54-64.html
   My bibliography  Save this article

Government budget, public-sector wages and capital taxes in a small open economy: A Hong Kong case

Author

Listed:
  • Chao, Chi-Chur
  • Yu, Eden S.H.
  • Yu, Wusheng

Abstract

This paper examines the welfare implications of adjustments in public-sector wages and capital tax rates for a small open economy in a general equilibrium setting. The individually and jointly optimal wage and tax policies are derived and interpreted. Facing reductions in land sales and falls in foreign interest rates, a cut in public workers' pay is needed to make their wage comparable to the private sector and a hike in capital taxes is recommended for a budgetary consideration. Using a computable general equilibrium model for Hong Kong, we numerically evaluate the various optimal policies which not only confirm the theoretical results but also provide quantitative estimates of the optimal policy variables.

Suggested Citation

  • Chao, Chi-Chur & Yu, Eden S.H. & Yu, Wusheng, 2009. "Government budget, public-sector wages and capital taxes in a small open economy: A Hong Kong case," China Economic Review, Elsevier, vol. 20(1), pages 54-64, March.
  • Handle: RePEc:eee:chieco:v:20:y:2009:i:1:p:54-64
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043-951X(08)00091-6
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael, Michael S. & Hatzipanayotou, Panos & Miller, Stephen M., 1993. "Integrated reforms of tariffs and consumption taxes," Journal of Public Economics, Elsevier, vol. 52(3), pages 417-428, October.
    2. Batra, Raveendra & Scully, Gerald W., 1971. "The theory of wage differentials: Welfare and immiserizing growth," Journal of International Economics, Elsevier, vol. 1(2), pages 241-247, May.
    3. Gupta, Manash Ranjan, 1995. "Tax on foreign capital income and wage subsidy to the urban sector in the Harris-Todaro model," Journal of Development Economics, Elsevier, vol. 47(2), pages 469-479, August.
    4. Hamid Beladi & Sugata Marjit, 1996. "An Analysis of Rural-Urban Migration and Protection," Canadian Journal of Economics, Canadian Economics Association, vol. 29(4), pages 930-940, November.
    5. M. Ali Khan, 1982. "Social Opportunity Costs and Immiserizing Growth: Some Observations on the Long Run Versus the Short," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 353-362.
    6. Wang, Zhi & Zhai, Fan, 1998. "Tariff Reduction, Tax Replacement, and Implications for Income Distribution in China," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 358-387, June.
    7. Michael, Michael S. & Hatzipanayotou, Panos, 2001. "Welfare effects of migration in societies with indirect taxes, income transfers and public good provision," Journal of Development Economics, Elsevier, vol. 64(1), pages 1-24, February.
    8. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    9. Lahiri, Sajal & Raimondos-Moller, Pascalis, 1998. "Public good provision and the welfare effects of indirect tax harmonisation," Journal of Public Economics, Elsevier, vol. 67(2), pages 253-267, February.
    10. Piggott, John & Whalley, John, 1987. "Interpreting Net Fiscal Incidence Calculations," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 685-694, November.
    11. Devaragan, Shantayanan & Lewis, Jeffrey D. & Robinson, Sherman, 1990. "Policy lessons from trade-focused, two-sector models," Journal of Policy Modeling, Elsevier, vol. 12(4), pages 625-657.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:20:y:2009:i:1:p:54-64. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/chieco .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.