Journal article
The Impact of Tax Reforms on Unemployment in a SMOPEC
Publication Details
Authors: | Michaelis, J. |
Publication year: | 2000 |
Journal: | Journal of Economics |
Pages range : | 175-201 |
Volume number: | 72 |
ISSN: | 0931-8658 |
eISSN: | 1617-7134 |
DOI-Link der Erstveröffentlichung: |
Abstract
This paper analyzes revenue-neutral tax reforms for a small open economy which is constrained to a balanced current account and whose producers have marker power on the world market. We consider origin-based and destination-based commodity taxes as well as taxes on income. the payroll, and on an imported factor of production. Our main findings are the following. First, the strength. and for some parameter constellations, even the sign of the employment effect of tax reforms varies with the degree of openness of the economy. Second. the indeterminacy of the sign of the employment effect crucially hinges on the presence of an internationally mobile factor. The central mechanism underlying our results are adjustments of the real exchange rate which have repercussions on wage and price setting and therefore on employment.
This paper analyzes revenue-neutral tax reforms for a small open economy which is constrained to a balanced current account and whose producers have marker power on the world market. We consider origin-based and destination-based commodity taxes as well as taxes on income. the payroll, and on an imported factor of production. Our main findings are the following. First, the strength. and for some parameter constellations, even the sign of the employment effect of tax reforms varies with the degree of openness of the economy. Second. the indeterminacy of the sign of the employment effect crucially hinges on the presence of an internationally mobile factor. The central mechanism underlying our results are adjustments of the real exchange rate which have repercussions on wage and price setting and therefore on employment.
