Taxes, Employment, and Social Welfare Services : An Analysis of International Spillover Effects

概要

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The paper presents a theoretical analysis of the macroeconomic effects of the labour tax reduction in a two-country general equilibrium framework. Both labour and goods markets are imperfectly competitive. Wages are determined by monopoly unions. A change in the labour tax rate in one country gives rise to international spillover effects on the other country. The model formally identifies and analyses spillover effects via both the terms of trade and capital reallocation. A reduction in the labour tax rate in the domestic economy leads to a reduction in wage costs for employers in the private sector. As a result, private-sector employment is increased in the domestic economy. A spillover effect via the terms of trade tends to increase employment in the foreign country, whereas an effect via capital reallocation works in the opposite direction. The former effect, however, dominates the latter and thus employment tends to increase in the foreign country. Policy coordination leads to a lower tax rate, higher private-sector employment, and a smaller supply of social welfare services.
名古屋商科大学の論文
2004-03-01