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Evaluating Tax Reforms in a Monetary Economy

  • Wen, Jean-Francois
  • Love, David R. F.

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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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 20 (1998)
Issue (Month): 3 (July)
Pages: 487-508

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Handle: RePEc:eee:jmacro:v:20:y:1998:i:3:p:487-508
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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