Distortionary taxation, international business cycles and real wage: explaining some puzzling facts

Francois Langot and Coralia Quintero-Rojas ()
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Coralia Quintero-Rojas: Department of Economics and Finance, Universidad de Guanajuato
Authors registered in the RePEc Author Service: Coralia Azucena Quintero Rojas

No EC201002, Department of Economics and Finance Working Papers from Universidad de Guanajuato, Department of Economics and Finance

Abstract: In this paper, we show that fluctuations in distortive taxes can account for most puzzling features of the U.S. economy. Namely, the observed real wage rigidity, the international correlation of investment and labor inputs, and the so-called quantity puzzle (according to which cross-country correlation of outputs is higher than the one of consumptions). This is done in a two-country search and matching model with fairly standard separable preferences, extended to include a tax/benefit system.

Keywords: Distortive taxes; real wage rigidity; international business cycles; search; matching (search for similar items in EconPapers)
JEL-codes: E32 E62 H24 J41 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010-08
New Economics Papers: this item is included in nep-bec, nep-dge, nep-mac, nep-opm and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:gua:wpaper:ec201002

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