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.
- University of Lille France
- University of Maine France
- University of Angers France
- CY Cergy Paris University France
- Université de Lille III (Charles-de-Gaulle) France
Dynamisches Gleichgewicht, 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, E27, Arbeitsuche, fiscal devaluation, consumption tax, payroll tax, labor market search, small open economy, Dynamic General Equilibrium model, 336, Optimale Besteuerung, Kleines-offenes-Land, JEL: H - Public Economics/H.H2 - Taxation, Macroeconomic Aspects of Public Finance, labor market search, [QFIN.TR]Quantitative Finance [q-fin]/Trading and Market Microstructure [q-fin.TR], and Revenue, payroll tax, J38, Subsidies, Saving, ddc:330, small open economy, Production, Labor Markets, and Informal Economy, and General Outlook, fiscal devaluation, Dynamic General Equilibrium mode, Steuerreform, Dynamic General Equilibrium mode,small open economy,labor market search,payroll tax,fiscal devaluation,consumption tax, and Labor Costs, consumption tax, Dynamic General Equilibrium model, Internationaler Wettbewerb, H21, Investment, JEL: E - Macroeconomics and Monetary Economics/E.E6 - Macroeconomic Policy, E62, JEL: E - Macroeconomics and Monetary Economics/E.E2 - Consumption, Compensation, Theorie, jel: jel:E62, jel: jel:H21, jel: jel:E27, jel: jel:J38
Dynamisches Gleichgewicht, 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, E27, Arbeitsuche, fiscal devaluation, consumption tax, payroll tax, labor market search, small open economy, Dynamic General Equilibrium model, 336, Optimale Besteuerung, Kleines-offenes-Land, JEL: H - Public Economics/H.H2 - Taxation, Macroeconomic Aspects of Public Finance, labor market search, [QFIN.TR]Quantitative Finance [q-fin]/Trading and Market Microstructure [q-fin.TR], and Revenue, payroll tax, J38, Subsidies, Saving, ddc:330, small open economy, Production, Labor Markets, and Informal Economy, and General Outlook, fiscal devaluation, Dynamic General Equilibrium mode, Steuerreform, Dynamic General Equilibrium mode,small open economy,labor market search,payroll tax,fiscal devaluation,consumption tax, and Labor Costs, consumption tax, Dynamic General Equilibrium model, Internationaler Wettbewerb, H21, Investment, JEL: E - Macroeconomics and Monetary Economics/E.E6 - Macroeconomic Policy, E62, JEL: E - Macroeconomics and Monetary Economics/E.E2 - Consumption, Compensation, Theorie, jel: jel:E62, jel: jel:H21, jel: jel:E27, jel: jel:J38
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