International Spillover Effects of Sectoral Tax Differentiation in Unionized Economies
The European Union has recently proposed sectoral tax differentiation as a policy to fight unemployment. The member countries are allowed to reduce the VAT rates on goods and services that are particularly labor intensive and price elastic. The paper provides a theoretical analysis of the effects of such tax reforms, with particular emphasis on the international repercussions of the policies. To that end we develop a two-country and two-sector model with monopolistic competition in the goods market and wage bargaining in the labor market. Policy externalities operate through the endogenously determined terms of trade. We examine how national and supranational commodity tax policies affect sectoral and total employment and characterize optimal commodity taxes with and without international policy cooperation. Some rough estimates of the welfare gains from policy coordination are also presented, using a calibrated version of the model.
|Date of creation:||2000|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
More information through EDIRC
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.:
- Keen, Michael & Lahiri, Sajal, 1998.
"The comparison between destination and origin principles under imperfect competition,"
Journal of International Economics,
Elsevier, vol. 45(2), pages 323-350, August.
- Michael Keen & Sajal Lahiri, 1994. "The comparison between destination and origin principles under imperfect competition," IFS Working Papers W94/08, Institute for Fiscal Studies.
- Keen, Michael & Lahiri, Sajal, 1994. "The Comparison Between Destination and Origin Principles Under Imperfect Competition," Economics Discussion Papers 10023, University of Essex, Department of Economics.
- Christopher Pissarides, 1997.
"The impact of employment tax cuts on unemployment and wages : the role of unemployment benefits and tax structure,"
LSE Research Online Documents on Economics
2332, London School of Economics and Political Science, LSE Library.
- Pissarides, Christopher A., 1998. "The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure," European Economic Review, Elsevier, vol. 42(1), pages 155-183, January.
- Christopher A. Pissarides, 1997. "The Impact of Employment Tax Cuts on Unemployment and Wages: The Role of Unemployment Benefits and Tax Structure," CEP Discussion Papers dp0361, Centre for Economic Performance, LSE.
- Rauch, James E., 1999.
"Networks versus markets in international trade,"
Journal of International Economics,
Elsevier, vol. 48(1), pages 7-35, June.
- Holmlund, Bertil & Kolm, Ann-Sofie, 1998.
"Environmental Tax Reform in a Small Open Economy with Structural Unemployment,"
Working Paper Series
1997:2, Uppsala University, Department of Economics.
- Bertil Holmlund & Ann-Sofie Kolm, 2000. "Environmental Tax Reform in a Small Open Economy With Structural Unemployment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(3), pages 315-333, May.
- Kolm, Ann-Sofie, 1998. "Differentiated payroll taxes, unemployment, and welfare," Journal of Public Economics, Elsevier, vol. 70(2), pages 255-271, November.
- Andersen, Torben M. & Sorensen, Jan Rose, 1995. "Unemployment and fiscal policy in an economic and monetary union," European Journal of Political Economy, Elsevier, vol. 11(1), pages 27-43, March.
- Huizinga, Harry, 1993.
" International Market Integration and Union Wage Bargaining,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 95(2), pages 249-255.
- Huizinga, H.P., 1993. "International market integration and union wage bargaining," Other publications TiSEM 567712dd-8f03-40d8-8428-c, Tilburg University, School of Economics and Management.
- Driffill, John & van der Ploeg, Frederick, 1993. "Monopoly Unions and the Liberalisation of International Trade," Economic Journal, Royal Economic Society, vol. 103(417), pages 379-85, March.
- Lockwood, Ben, 1992.
"Commodity Tax Competition Under Destination and Origin Principles,"
CEPR Discussion Papers
733, C.E.P.R. Discussion Papers.
- Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September.
- Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, vol. 42(7), pages 1251-1267, July.
- Jan Sørensen, 1994. "Market integration and imperfect competition in labor and product markets," Open Economies Review, Springer, vol. 5(1), pages 115-130, March.
- van der ploeg, F., 1987. "Coordination of optimal taxation in a two-country equilibrium model," Economics Letters, Elsevier, vol. 24(3), pages 279-285.
- Holmlund, B. & Kolm, A.-S., 1999.
"Economic Integration, Imperfect Competition, and International Policy Coordination,"
1999:7, Uppsala - Working Paper Series.
- Holmlund, Bertil & Kolm, Ann-Sofie, 1999. "Economic Integration, Imperfect Competition, and International Policy Coordination," Working Paper Series 1999:7, Uppsala University, Department of Economics.
- Driffill, John & van der Ploeg, Frederick, 1995. " Trade Liberalization with Imperfect Competition in Goods and Labour Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(2), pages 223-243, June.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_295. 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: (Klaus Wohlrabe)
If references are entirely missing, you can add them using this form.