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A TALE OF TAX POLICIES IN OPEN ECONOMIES

Stéphane Auray, Aurélien Eyquem and Paul Gomme

International Economic Review, 2016, vol. 57, issue 4, 1299-1333

Abstract: To evaluate fiscal policy reforms for Euro‐area countries, this article develops and calibrates a small open economy model. Debt reduction reforms require higher tax rates in the short term in exchange for lower rates in the long term as the debt‐servicing burden falls. Using the capital income tax to implement such a policy leads to welfare gains; the consumption tax, a very small welfare gain; and the labor income tax, a welfare loss. Holding fixed the long‐run debt–output ratio, offsetting a lower capital income tax with either a higher labor income or consumption tax generally yields welfare gains.

Date: 2016
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Citations: View citations in EconPapers (3)

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https://doi.org/10.1111/iere.12199

Related works:
Working Paper: A Tale of Tax Policies in Open Economies (2016)
Working Paper: A Tale of Tax Policies in Open Economies (2015) Downloads
Working Paper: A Tale of Tax Policies in Open Economies (2014)
Working Paper: A Tale of Tax Policies in Open Economies (2013)
Working Paper: A Tale of Tax Policies in Open Economies (2012) Downloads
Working Paper: A Tale of Tax Policies in Open Economies (2012) Downloads
Working Paper: A Tale of Tax Policies in Open Economies (2012) Downloads
Working Paper: A Tale of Tax Policies in Open Economies (2011) Downloads
Working Paper: A Tale of Tax Policies in Open Economies (2011) Downloads
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