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

Stéphane Auray, Aurélien Eyquem and Xiaofei Ma
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Xiaofei Ma: GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique, UEVE - Université d'Évry-Val-d'Essonne, UL2 - Université Lumière - Lyon 2

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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 output , 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)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-pbe
Date: 2017
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Journal Article: Competitive tax reforms in a monetary union with endogenous entry and tradability (2017) Downloads
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