Tax reform and labour-market performance in the euro area: A simulation-based analysis using the New Area-Wide Model

Coenen, Gunter and McAdam, Peter and Straub, Roland (2008) Tax reform and labour-market performance in the euro area: A simulation-based analysis using the New Area-Wide Model. Journal of Economic Dynamics and Control, 32 (8). pp. 2543-2583. ISSN 0165-1889. (The full text of this publication is not available from this repository)

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Official URL
http://dx.doi.org/10.1016/j.jedc.2007.09.007

Abstract

In this paper, we employ a calibrated two-country version of the New Area-Wide Model (NAWM) developed at the European Central Bank to examine the potential benefits and spillovers of reducing labour-market distortions caused by euro area tax structures. Our analysis shows that lowering tax distortions to levels prevailing in the United States would result in an increase in hours worked and output by more than 10%. At the same time, tax reductions would have positive spillovers to the euro area's trade partners, bolstering the case for tax reforms from a global perspective. Finally, we illustrate that, in the presence of heterogeneous households, distributional effects may be of importance when gauging the impact of tax reforms.

Item Type: Article
Uncontrolled keywords: DSGE modelling; Limited asset-market participation; Fiscal policy; Tax reform; Euro area
Subjects: H Social Sciences
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: G.F. Green
Date Deposited: 24 Jul 2008 17:06
Last Modified: 19 Jun 2014 14:21
Resource URI: http://kar.kent.ac.uk/id/eprint/9411 (The current URI for this page, for reference purposes)
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