Optimal Fiscal Devaluation
Copyright policy )Optimal Fiscal Devaluation
We study fiscal devaluation in a small-open economy with labor market search frictions. Our analysis shows the key role of both dimensions in shaping the optimal tax scheme. By reducing labor market distortions, the tax reform is welfare-improving. Yet, as it makes imports more expensive, fiscal devaluation lowers the agents' purchasing power, which is welfare-reducing. These contrasting effects give rise to an optimal tax scheme. Besides, transition matters. If the economy is better off in the long run, the required transitional saving effort increases the cost of the reform, thereby calling for a moderate magnitude of fiscal devaluation.
- École Normale Supérieure France
- Université de Lille III (Charles-de-Gaulle) France
- University of Lille France
- Institute for the Study of Labor Germany
- University of Maine France
JEL: J - Labor and Demographic Economics/J.J3 - Wages, fiscal devaluation, consumption tax, payroll tax, labor market search, small open economy, Dynamic General Equilibrium model, Optimale Besteuerung, Kleines-offenes-Land, Macroeconomic Aspects of Public Finance, E.E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook, and Revenue, J38, ddc:330, small open economy, and General Outlook, Dynamic General Equilibrium mode, Steuerreform, consumption tax, Dynamic General Equilibrium model, Internationaler Wettbewerb, JEL: E - Macroeconomics and Monetary Economics/E.E6 - Macroeconomic Policy, E62, Compensation, Theorie, Dynamisches Gleichgewicht, fiscal devaluation; consumption tax; payroll tax; labor market search; small open economy; Dynamic General Equilibrium model, E27, Arbeitsuche, 336, JEL: H - Public Economics/H.H2 - Taxation, labor market search, [QFIN.TR]Quantitative Finance [q-fin]/Trading and Market Microstructure [q-fin.TR], E.E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy, payroll tax, Subsidies, Saving, Production, Labor Markets, and Informal Economy, [QFIN.TR] Quantitative Finance [q-fin]/Trading and Market Microstructure [q-fin.TR], fiscal devaluation, Dynamic General Equilibrium mode,small open economy,labor market search,payroll tax,fiscal devaluation,consumption tax, H.H2 - Taxation, Subsidies, and Revenue, and Labor Costs, J.J3 - Wages, Compensation, and Labor Costs, H21, Investment, JEL: E - Macroeconomics and Monetary Economics/E.E2 - Consumption, jel: jel:E62, jel: jel:E27, jel: jel:J38, jel: jel:H21
JEL: J - Labor and Demographic Economics/J.J3 - Wages, fiscal devaluation, consumption tax, payroll tax, labor market search, small open economy, Dynamic General Equilibrium model, Optimale Besteuerung, Kleines-offenes-Land, Macroeconomic Aspects of Public Finance, E.E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook, and Revenue, J38, ddc:330, small open economy, and General Outlook, Dynamic General Equilibrium mode, Steuerreform, consumption tax, Dynamic General Equilibrium model, Internationaler Wettbewerb, JEL: E - Macroeconomics and Monetary Economics/E.E6 - Macroeconomic Policy, E62, Compensation, Theorie, Dynamisches Gleichgewicht, fiscal devaluation; consumption tax; payroll tax; labor market search; small open economy; Dynamic General Equilibrium model, E27, Arbeitsuche, 336, JEL: H - Public Economics/H.H2 - Taxation, labor market search, [QFIN.TR]Quantitative Finance [q-fin]/Trading and Market Microstructure [q-fin.TR], E.E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy, payroll tax, Subsidies, Saving, Production, Labor Markets, and Informal Economy, [QFIN.TR] Quantitative Finance [q-fin]/Trading and Market Microstructure [q-fin.TR], fiscal devaluation, Dynamic General Equilibrium mode,small open economy,labor market search,payroll tax,fiscal devaluation,consumption tax, H.H2 - Taxation, Subsidies, and Revenue, and Labor Costs, J.J3 - Wages, Compensation, and Labor Costs, H21, Investment, JEL: E - Macroeconomics and Monetary Economics/E.E2 - Consumption, jel: jel:E62, jel: jel:E27, jel: jel:J38, jel: jel:H21
selected citations These citations are derived from selected sources.This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).6 popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.Average influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).Top 10% impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.Average
Citations provided by BIP!Popularity provided by BIP!