A Tale of Tax Policies in Open Economies

Auray, Stéphane; Eyquem, Aurélien; Gomme, Paul

A Tale of Tax Policies in Open Economies

Stéphane Auray, Aurélien Eyquem and Paul Gomme

No 15004, Working Papers from Concordia University, Department of Economics

Abstract: To evaluate fiscal policy reforms for Euro-area countries, this paper 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.

Keywords: Fiscal policies; open economies; public deficits; tax reforms. (search for similar items in EconPapers)
JEL-codes: E31 E62 F41 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2015-09
New Economics Papers: this item is included in nep-dge, nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://paulgomme.github.io/a-tale-of-tax-policies-2015.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:crd:wpaper:15004

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