The redistribution of trade gains and the equity-efficiency trade-of

Marco de Pinto ()
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Marco de Pinto: University of Trier

No 201244, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: 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.

Keywords: trade liberalization; heterogeneous firms; trade unions; income inequality; unemployment benefits; taxes (search for similar items in EconPapers)
JEL-codes: F1 F16 H2 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2012
New Economics Papers: this item is included in nep-lab and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201244

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