EconPapers    
Economics at your fingertips  
 

Tax devaluation with endogenous margins

Pascal Belan (), Clément Carbonnier () and Martine Carré

Working Papers from HAL

Abstract: Several European countries have recently envisaged to implement fiscal policies that constitute alternatives to monetary devaluation in the context of a monetary union. Social value-added tax is one of these alternatives: it consists to shift fiscal revenue from payroll tax to value-added tax, with the objective to address simultaneously competitiveness and employment problems. We analyze the consequence of such a policy in a model of international trade with heterogeneous firm à la Melitz. We depart from the CES case for taking account of the way changes in the tax rates may mo dify competition between producers, their margins, and the way these changes are refefected in prices. We first show that social VAT is neutral for zero trade balances. Then, in a two-country model, we show that, after the introduction of the social VAT, intensive and extensive margins increase in the net importing country regardless of the country that implements the policy. Both margins decrease in the net exporting country. Considering non-CES utility functions, the effects of social VAT are attenuated (amplified) if love for variety increases (decreases) with quantities

Keywords: Fiscal devaluation; social VAT; tax reform; international trade (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-pbe
Date: 2017-04-28
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01515806
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://hal.archives-ouvertes.fr/hal-01515806/document (application/pdf)

Related works:
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:hal:wpaper:hal-01515806

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2019-10-18
Handle: RePEc:hal:wpaper:hal-01515806