European Fiscal Harmonization and the French Economy

W. Perraudin and Thierry Pujol

No 1990/096, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the implications of European fiscal harmonization for the French economy using a general equilibrium model. The latter extends the overlapping generations simulation model of Auerbach and Kotlikoff in three ways. A well-developed external sector is included. Households face constraints in their borrowing. The population comprises “rich” and “poor” households with different labor productivities. The harmonization policy that involves cuts in VAT and savings taxes leads to welfare losses for both rich and poor approximately equivalent to one percent of GDP.

Keywords: WP; wage tax; interest rate; lump sum; fiscal drag; savings tax; open economy; harmonization reform; utility function; cost of capital; lump sum tax; exchange rate; VAT system; profit tax; tax harmonization reform; benefits household; Consumption; Value-added tax; Personal income tax; Consumption taxes; Income and capital gains taxes (search for similar items in EconPapers)
Pages: 52
Date: 1990-10-01
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1990/096

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