English, Article, Journal or magazine article edition: Welfare Effects of Tax Policy in Open Economies: Stabilization and Cooperation. Jinill Kim; Sunghyun Henry Kim

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Bookmark: http://trove.nla.gov.au/version/200642
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Welfare effects of tax policy in open economies: stabilization and cooperation
Author
  • Jinill Kim
  • Sunghyun Henry Kim
Physical Description
  • preprint
Notes
  • This paper studies optimal tax policy design problem by employing a two-country dynamic general equilibrium model with incomplete asset markets. We investigate the possibility of welfare-improving active, contingent tax policies (tax rates respond to changes in productivity) on consumption, and capital and labor income taxes. Unlike the conventional wisdom regarding stabilization policies, procyclical factor income tax policy is optimal in open economy. Procyclical tax policy generates efficiency gains by correcting market incompleteness. Optimal tax policy under cooperative equilibrium is similar to that under the Nash equilibrium and welfare gains from tax policy coordination is quite small.
  • RePEc:tuf:tuftec:0503
  • This paper studies optimal tax policy problem by employing a two-country dynamic general equilibrium model with incomplete asset markets. We investigate the possibility of welfare-improving active, contingent tax policies (under which tax rates respond to changes in productivity) on capital and labor income and consumption. Unlike the conventional wisdom regarding stabilization policies, procyclical factor-income tax policies in general improves welfare in open economies. Procyclical tax policies generate efficiency gains by correcting asset market incompleteness. Optimal tax policy under cooperative equilibrium is similar to that under the Nash equilibrium, and welfare gains from tax policy coordination is quite small
  • optimal tax, procyclical, countercyclical, stabilization, cooperation
  • RePEc:sce:scecf5:169
  • income tax, welfare, stabilization, cooperation
  • RePEc:ecm:feam04:399
  • welfare, tax policy, second-order approximation, cooperative equilibrium, Nash equilibrium
  • RePEc:sce:scecf3:259
  • This paper studies an international tax policy design problem by employing a two-country dynamic general equilibrium model with incomplete asset markets. We investigate the possibility of welfare improving active tax policies, in particular capital and labor income tax, under the non-cooperative Nash equilibrium and the cooperative equilibrium. Unlike the conventional wisdom regarding stabilization policies, optimal tax policies in our economy are procyclical. Relative to the non-cooperative setting, international tax policy cooperation requires more active tax policies (about two times) and generates large extra welfare gains (by about a third).
  • Welfare ; Income tax
  • RePEc:fip:fedgfe:2003-51
Language
  • English
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