Intergenerational and international welfare leakages of a tariff in a small open economy

A dynamic overlapping-generations model of a small open economy with imperfect competition in the goods market is constructed. A tariff increase reduces output and employment and leads to an appreciation of the real exchange rate both in the impact period and in the new steady state. The tariff shock has significant intergenerational distribution effects. Old existing generations gain less than both younger existing generations and future generations. Bond policy neutralizes the intergenerational inequities and allows the computation of first-best and second- best optimal tariff rates. The first-best tariff exploits national market power, but the second-best tariff contains a correction to account for the existence of a potentially suboptimal product subsidy.

Loving and Learning

https://digitalcommons.library.umaine.edu/mmb-vp/2049/thumbnail.jp

Intergenerational and international welfare leakages of a tariff in a small open economy

A dynamic overlapping-generations model of a small open economy with imperfect competition in the goods market is constructed. A tariff increase reduces output and employment and leads to an appreciation of the real exchange rate both in the impact period and in the new steady state. The tariff shock has significant intergenerational distribution effects. Old existing generations gain less than both younger existing generations and future generations. Bond policy neutralizes the intergenerational inequities and allows the computation of first-best and second-best optimal tariff rates. The first-best tariff exploits national market power, but the second-best tariff contains a correction to account for the existence of a potentially suboptimal product subsidy.

Documentation of CORTAX

CORTAX is applied in Bettendorf et al. (2006), a simulation study on the economic and welfare implications of reforms in corporate income taxation. This technical documentation of the model consists of the derivation and listing of the equations of the model and a justification of the calibration.

Do daily retail gasoline prices adjust asymmetrically?

This paper analyzes adjustments in the Dutch retail gasoline prices. We estimate an error correction model on changes in the daily retail price for gasoline (taxes excluded) for the period 1996-2004 taking care of volatility clustering by estimating an EGARCH model. It turns out the volatility process is asymmetrical: an unexpected increase in the producer price has a larger effect on the variance of the producer price than an unexpected decrease. We do not find evidence for amount asymmetry, either for the long run or for the short run. However, there is a faster reaction to upward changes in spot prices than to downward changes in spot prices. This implies timing or pattern asymmetry. This asymmetry starts three days after the change in the spot price and lasts for four days.

Who benefits from tax competition in the European Union?

Statutory tax rates have declined in the European Union in the recent decades. An applied general equilibrium model on corporate taxation sheds light on the economic and welfare implications of tax rate reforms. Domestic distortions proof highly relevant as even unilateral reductions of the corporate income tax rate might reduce welfare if the labour tax rate has to be increased. Profit shifting induces countries to underbid each others tax rates, but this effect is sizable only if two countries are closely linked. The harmful external effects of CIT rate reductions are limited, which reduces the need for European coordination of CIT rates.

Study on the impacts of fiscal devaluation. Final report

The main research question of the project is summarized as: What are the macroeconomic and distributional consequences of fiscal devaluation for a selection of countries and the EU as a whole? The selected countries are France, Italy, Spain and Austria. The project aims to perform four tasks: 1. Provide a review of the impacts of fiscal devaluations in the light of economic literature and former studies. 2. Use suitable models to analyse macroeconomic impacts of fiscal devaluation in the selected countries and do a comparative analysis of the results obtained in different countries. 3. Analyse distributional impact of fiscal devaluations with the help of models in the selected countries and link these results, if possible, to the macro-level analysis. 4. Analyse the suitability of the policy for the EU as a whole with the help of model simulations and in the light of the country-specific results