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Jeudi 12 Décembre 2013

Paul GOMME (Concordia University and CIREQ)

présentera une communication : "A Tale of Tax Policies in Open Economies" (avec Stéphane AURAY et Aurélien EYQUEM)

de 14 h à 15 h 30 en salle S016 au CREST, 15 Boulevard Gabriel Péri, 92245 MALAKOFF (Métro : Malakoff/Plateau de Vanves (Immeuble "Malakoff 2)).

Abstract : Recent financial crises in Europe and the government budget battles in the U.S. point to the importance of fiscal discipline among developed countries. This paper develops an open economy model, calibrated to either the U.S. or a subset of the EMU, to evaluate the impact of various fiscal reforms. The first set of experiments consider 25% reductions in the government debt-to-output ratio. Implementing this reduction through capital income taxes raises economic welfare owing to the beneficial effects of lower taxes in the long run since tax revenue requirements fall. Using the consumption tax yields only a very small welfare benefit: the short run costs of higher taxes largely offset the long run benefits.  Policy implementation through the labor income tax generates welfare losses. The second set of experiments leave the long run debt-to-output ratio unchanged. Replacing capital income tax revenue with another tax is generally welfare-enhancing. Doing so using the labor income tax in the EMU-12 proves to be an exception: In this case, the tax has to rise quite a bit since the EMU-12 is close to the peak of its labor income tax Laffer curve. Substituting consumption tax revenue for labor income tax revenue is also welfare-improving since, in an open economy model, the burden of the consumption tax falls partly on foreign producers. Such a shift in taxes improves the domestic economy’s international competitiveness