The redistribution of trade gains and the equity-efficiency trade-of
The contribution of this paper is to derive an optimal redistribution scheme for trade gains in the case of a governments objective function that explicitly accounts for the equity-efficiency trade-o¤. The government pays unemployment benefits (UB) either .financed by a wage tax, a payroll tax or a pro.t tax paid by exporters only. Using a Melitz -type framework with unionized labor markets and heterogeneous workers we show that there is a clear-cut ranking of the redistribution schemes in terms of welfare level: 1. UB .financed by a pro.t tax paid by exporters, 2. UB .financed by a wage tax, 3. UB .financed by a payroll tax.
|Date of creation:||2012|
|Date of revision:|
|Publication status:||Forthcoming in|
|Contact details of provider:|| Postal: Universitätsstraße 25, 35037 Marburg|
Web page: http://www.uni-marburg.de/fb02/
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