Competitive Tax Reforms in a Monetary Union with Endogenous Entry and Tradability

Stéphane Auray, Aurélien Eyquem and Xiaofei Ma

No 1706, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: We quantify the effects of competitive tax reforms within a two-country monetary union model with endogenous entry and endogenous tradability. As expected, their effects on out-put, consumption, hours worked and the terms of trade are positive. Extensive margins provide additional transmission mechanisms that turn the response of foreign output from negative to positive and yields larger aggregate welfare gains compared to alternative models. These positive spillovers are due to the positive effect of the reform on variety creation in both countries and change our vision of this type of reform from beggar-thy-neighbor to prosper-thy-neighbor.

Keywords: Competitive tax reforms; endogenous tradability; endogenous varieties; monetary union; taxes; fiscal devaluations (search for similar items in EconPapers)
JEL-codes: E32 E52 F41 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Competitive tax reforms in a monetary union with endogenous entry and tradability (2017)
Working Paper: Competitive tax reforms in a monetary union with endogenous entry and tradability (2017)
Working Paper: Competitive Tax Reforms in a Monetary Union with Endogenous Entry and Tradability (2017)
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