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A Tale of Tax Policies in Open Economies

  • Stéphane Auray

    ()

    (ENSAI)

  • Aurélien Eyquem

    ()

    (Université de Lyon)

  • Paul Gomme

    ()

    (Concordia University)

Tax-based deficit reduction experiments for the U.S. and EMU-12 are conducted using an open economy model. In welfare terms, raising the consumption tax is the least costly, followed by the labor income tax, then the capital income tax. Use of an open economy model means that the incidence of the consumption tax is borne in part by foreign producers. Among revenue-neutral tax experiments, partially replacing the capital income tax is welfare-enhancing, although there are short term losses. Replacing labor income tax revenue with a consumption tax improves international competitiveness and is welfare-improving

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Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2012-32.

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Length: 41
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:crs:wpaper:2012-32
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  1. Stéphane Auray & Beatriz De Blaz & Aurélien Eyquem, 2010. "Ramsey Policies in a Small Open Economy with Sticky Prices and Capital," Post-Print halshs-00588092, HAL.
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