- Authors
- Miriam Kohl University of Mainz
- Philipp M. RichterTU Dresden#CESifo#DIW Berlin#KCG
- title
- Unilateral Tax Policy in the Open Economy
- Please use the following URL when quoting:
- https://nbn-resolving.org/urn:nbn:de:bsz:14-qucosa2-759594
- Series
- CEPIE Working Paper
- multivolume_volume0
- 05/21
- issn
- 2510-1196
- Abstract (EN)
- This paper examines the effects of a unilateral reform of the redistribution policy in an economy open to international trade. We set up a general equilibrium trade model with heterogeneous agents allowing for country asymmetries. We show that under international trade compared to autarky, a unilateral tax increase leads to a less pronounced decline in aggregate real income in the reforming country, while income inequality is reduced to a larger extent for sufficiently small initial tax rates. We highlight as a key mechanism a tax-induced reduction in the market size of the reforming country relative to its trading partner, resulting in a firm selection effect towards exporting. From the perspective of a non-reforming trading partner, the unilateral redistribution policy reform resembles a unilateral increase in trade costs leading to a deterioration of terms-of-trade and a decline in both aggregate real income and inequality.
- Keywords (DE)
- Einkommensungleichheit, Umverteilung, Handel, Heterogene Firmen
- Keywords (EN)
- Income inequality, Redistribution, International trade, Heterogeneous firms
- Classification (DDC)
- 330
- Classification (RVK)
- QC 000
- university_publisher
- Technische Universität Dresden, Dresden
- URN Qucosa
- urn:nbn:de:bsz:14-qucosa2-759594
- Qucosa date of publication
- 14.09.2021
- Document type
- research_paper
- Document language
- English
- licence