Productivity Gaps and Tax Policies Under Asymmetric Trade

Lucas Bretschger and Simone Valente

No 16/239, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: We build a two-country model of endogenous growth to study the welfare effects of taxes on tradable primary inputs when countries engage in asymmetric trade. We obtain explicit links between persistent gaps in productivity growth and the incentives of resource exporting (importing) countries to subsidize (tax) domestic resource use. The exporters' incentive to subsidize hinges on slower productivity growth and is disconnected from the importers' incentive to tax resource inflows i.e., rent extraction. Moreover, faster productivity growth exacerbates the im- porters' incentive to tax, beyond the rent-extraction motive. In a strategic tax game, the only equilibrium is of Stackelberg type and features, for a wide range of parameter values, positive exporters' subsidies and importers' taxes at the same time. The model predictions concerning the impact of resource taxes on relative income shares are supported by empirical evidence.

Keywords: Productivity Gaps; Endogenous Growth; International Trade; Tax Policy (search for similar items in EconPapers)
JEL-codes: F43 O40 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2016-03
New Economics Papers: this item is included in nep-env, nep-gro, nep-int and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.cer.ethz.ch/content/dam/ethz/special-in ... papers/WP-16-239.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not found UA (http://www.cer.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-16-239.pdf [301 Moved Permanently]--> https://www.cer.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-16-239.pdf [301 Moved Permanently]--> https://cer.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-16-239.pdf)

Related works:
Journal Article: PRODUCTIVITY GAPS AND TAX POLICIES UNDER ASYMMETRIC TRADE (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:16-239

Access Statistics for this paper

More papers in CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich Contact information at EDIRC.
Bibliographic data for series maintained by ().