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Unilateral Tax Policy in the Open Economy

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  • Kohl, Miriam
  • Richter, Philipp

Abstract

This paper examines the effects of unilateral tax policy in the open economy. We construct a general equilibrium trade model with heterogeneous agents allowing for country asymmetries. We find that in contrast to a symmetric country set-up the share of exporting firms is endogenous. We show that a unilateral increase in the tax rate affects the factor allocation in the regulating country and the trading partner country differently. We further derive the implications for aggregate income and inequality in both countries.

Suggested Citation

  • Kohl, Miriam & Richter, Philipp, 2019. "Unilateral Tax Policy in the Open Economy," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203581, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc19:203581
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    File URL: https://www.econstor.eu/bitstream/10419/203581/1/VfS-2019-pid-27721.pdf
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    Cited by:

    1. Quint, Ansgar F. & Rudsinske, Jonas F., 2020. "International trade and tax-motivated transfer pricing," Center for European, Governance and Economic Development Research Discussion Papers 406, University of Goettingen, Department of Economics.

    More about this item

    Keywords

    International trade; Income inequality; Redistribution; Heterogeneous firms;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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