Product market integration, tax distortions and public sector size
The implications of product market integration for public sector activities (transfers and public consumption) are considered in a standard setting. The analysis supports that a larger public sector (higher tax rate) tends to increase wages and worsen wage competitiveness. However, the implications of product market integration for the public sector are far from straightforward. The reason is gains-from-trade effects which tend to increase the tax base and decrease the opportunity costs of public consumption (marginal utility of private consumption falls). It follows that the retrenchment view that product market integration inevitable leads to a downward pressure on public sector activities does not get support in a standard setting. A particularly noteworthy ?finding is that a country with a large public sector (strong preferences for public consumption) may bene?fit more by integrating with a country with a smaller public sector (weak preferences for public consumption).
|Date of creation:||18 Dec 2013|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.econ.au.dk/afn/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daveri, Francesco & Tabellini, Guido, 1997.
"Unemployment, Growth and Taxation in Industrial Countries,"
CEPR Discussion Papers
1681, C.E.P.R. Discussion Papers.
- Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
- Francesco Daveri & Guido Tabellini, . "Unemployment, Growth and Taxation in Industrial Countries," Working Papers 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Torben M. Andersen & Allan Sørensen, 2012.
"Globalization, Tax Distortions, and Public-Sector Retrenchment,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 114(2), pages 409-439, 06.
- Torben M. Andersen & Allan Sørensen, 2010. "Globalization, tax distortions and public sector retrenchment," Economics Working Papers 2010-09, Department of Economics and Business Economics, Aarhus University.
- van der ploeg, F., 1987. "Coordination of optimal taxation in a two-country equilibrium model," Economics Letters, Elsevier, vol. 24(3), pages 279-285.
- Devereux, Michael B, 1991. "The Terms of Trade and the International Coordination of Fiscal Policy," Economic Inquiry, Western Economic Association International, vol. 29(4), pages 720-36, October.
- Paolo Epifani & Gino Gancia, 2008.
"Openness, Government Size and the Terms of Trade,"
IEW - Working Papers
359, Institute for Empirical Research in Economics - University of Zurich.
- Chari, V V & Kehoe, Patrick J, 1990.
"International Coordination of Fiscal Policy in Limiting Economies,"
Journal of Political Economy,
University of Chicago Press, vol. 98(3), pages 617-36, June.
- V. V. Chari & Patrick J. Kehoe, 1989. "International coordination of fiscal policy in limiting economies," Staff Report 121, Federal Reserve Bank of Minneapolis.
- Richard C. Marston, 1983. "Stabilization Policies in Open Economies," NBER Working Papers 1117, National Bureau of Economic Research, Inc.
- Marston, Richard C., 1985. "Stabilization policies in open economies," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 17, pages 859-916 Elsevier.
- Michiel Evers & Ruud de Mooij & Daniel van Vuuren, 2005.
"What explains the variation in estimates of labour supply elasticities?,"
CPB Discussion Paper
51, CPB Netherlands Bureau for Economic Policy Analysis.
- Michiel Evers & Ruud A. De Mooij & Daniel J. Van Vuuren, 2005. "What Explains the Variation in Estimates of Labour Supply Elasticities?," CESifo Working Paper Series 1633, CESifo Group Munich.
- Michiel Evers & Ruud A. de Mooij & Daniel J. van Vuuren, 2006. "What explains the Variation in Estimates of Labour Supply Elasticities?," Tinbergen Institute Discussion Papers 06-017/3, Tinbergen Institute.
- van der Ploeg, Frederick, 1988.
"International policy coordination in interdependent monetary economies,"
Journal of International Economics,
Elsevier, vol. 25(1-2), pages 1-23, August.
- van der Ploeg, Frederick, 1987. "International Policy Coordination in Interdependent Monetary Economies," CEPR Discussion Papers 169, C.E.P.R. Discussion Papers.
- Torben Andersen & Allan Sørensen, 2011.
"Globalisation squeezes the public sector—is it so obvious?,"
International Tax and Public Finance,
Springer, vol. 18(4), pages 369-382, August.
- Torben M. Andersen & Allan Sørensen, 2008. "Globalisation squeezes the public sector - is it so obvious?," Economics Working Papers 2008-08, Department of Economics and Business Economics, Aarhus University.
- Bruce, Neil & Purvis, Douglas D., 1985.
"The specification and influence of goods and factor markets in open-economy macroeconomic models,"
Handbook of International Economics,
in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 16, pages 807-857
- Neil Bruce & Douglas D. Purvis, 1982. "The Specification and Influence of Goods and Factor Markets in Open Economy Macroeconomic Models," Working Papers 499, Queen's University, Department of Economics.
- Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
- Razin, Assaf & Sadka, Efraim & Suwankiri, Benjarong, 2011. "Migration and the Welfare State: Political-Economy Policy Formation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262016109.
When requesting a correction, please mention this item's handle: RePEc:aah:aarhec:2013-28. 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: ()
If references are entirely missing, you can add them using this form.