Tax reforms under market distortions in product and labour markets

Angelopoulos, Konstantinos and Jiang, Wei and Malley, James R. (2013) Tax reforms under market distortions in product and labour markets. European Economic Review, 61 . pp. 28-42. ISSN 0014-2921. (doi:https://doi.org/10.1016/j.euroecorev.2013.03.003) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

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Official URL
http://dx.doi.org/10.1016/j.euroecorev.2013.03.003

Abstract

Using a two-agent model comprised of capitalists and workers, this paper examines the importance of imperfect competition in product and labour markets in determining the welfare effects of tax reform. The reform considered consists of eliminating the capital tax alongside a concurrent rise in the labour tax. In contrast to the perfectly competitive model, models with product or labour market failures each result in welfare losses for the workers in the long-run. In a realistic calibration to the UK economy, combining these imperfections implies that this tax reform will be Pareto improving in the long-run. However, these welfare gains over longer time horizons come at the cost of short-run losses, which, consistent with previous research, result in welfare losses for workers post-reform.

Item Type: Article
Additional information: number of additional authors: 2;
Uncontrolled keywords: Market imperfections; Heterogeneous agents; Unemployment; Tax reform
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Stewart Brownrigg
Date Deposited: 07 Mar 2014 00:05 UTC
Last Modified: 21 Apr 2016 14:29 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/40237 (The current URI for this page, for reference purposes)
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