Home production, labor taxation and trade account

Luigi Bonatti ()

No 715, Department of Economics Working Papers from Department of Economics, University of Trento, Italia

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.

Keywords: Market time; employment rate; nontradable goods; two-country model; endogenous growth. (search for similar items in EconPapers)
JEL-codes: F10 F43 H24 J22 O41 (search for similar items in EconPapers)
Date: 2007
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