Unilateral tax policy in the open economy

• 成果类型: Article
• 署名作者: Kohl, Miriam; Richter, Philipp M.
• 署名单位: Johannes Gutenberg University of Mainz; Leibniz Association; Ifo Institut; University of Mannheim; Leibniz Association; DIW Berlin - Deutsches Institut fur Wirtschaftsforschung
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2023.103829
• 发表日期: 2023
• 关键词: income inequality; redistribution; international trade; heterogeneous firms

摘要

This paper examines the effects of a unilateral reform of a redistributive tax-transfer system in an open economy. Compared to autarky, a tax increase leads to a smaller decline in aggregate income in the open economy, and it is also more effective at reducing income inequality, provided the tax rates are sufficiently low. Aggregating effects on income and income inequality using an Atkinson social welfare function, we find that optimal tax rates are positive in the open economy and higher than under autarky. The key mechanism is 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 in line with a terms-of-trade improvement. From the perspective of a non-reforming trading partner, this resembles a unilateral increase in trade costs leading to a deterioration of terms of trade and a decline in aggregate real income and inequality.