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Intranational Trade and Regional Tax Rates: A Welfare Analysis on the U.S. Economy

  • Hakan Yilmazkuday

    ()

    (Department of Economics, Florida International University)

This paper analyzes the effects of personal tax rates on macroeconomic variables at regional and national levels through a general equilibrium trade model with private and public sectors, migrating individuals, intermediate inputs and ?nal goods trade, and an analytical solution. The regional model can explain state-level variables in the U.S. almost perfectly. The counterfactuals on the U.S. economy suggest that a nationwide increase in the state-level dividend-income tax rates would be the best option to expand the private sector, tax revenues, and, most importantly, the individual welfare in all states; a nationwide increase in the state-level wage-income tax rates would hurt the economy in all states; property and sales taxes have fewer effects on the U.S. economy. The results are mainly driven by intermediate input trade.

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File URL: http://casgroup.fiu.edu/pages/docs/3501/1311369803_11-06.pdf
File Function: First version, 2011
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Paper provided by Florida International University, Department of Economics in its series Working Papers with number 1106.

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Length: 54 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:fiu:wpaper:1106
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Web page: http://economics.fiu.edu

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