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Home production, labor taxation and trade account

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  • Luigi Bonatti

Abstract

The two-country growth model developed in this paper incorporates home production and distinguishes between a market sector producing services that can also be home-produced and a market sector producing goods without home-produced substitutes. This distinction coincides in the model with the distinction between the sector producing internationally tradable goods and the sector producing nontradables. Hence, differentials in labor tax rates across countries, which determine differences in the allocation of households� time between market activities and home activities, influence also the mix of tradable and nontradable goods that characterizes the market output of each country, thus affecting their bilateral trade balance.

Suggested Citation

  • Luigi Bonatti, 2007. "Home production, labor taxation and trade account," Department of Economics Working Papers 0715, Department of Economics, University of Trento, Italia.
    • Handle: RePEc:trn:utwpde:0715
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    References listed on IDEAS

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    More about this item

    Keywords

    Market time; employment rate; nontradable goods; two-country model; endogenous growth.;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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