Overview
This paper studies an international tax policy design problem by employing a two-country dynamic general equilibrium model with incomplete asset markets. We investigate the possibility of welfareimproving active tax policies, in particular capital and labor income tax, under the non-cooperative Nash equilibrium and the cooperative equilibrium. Unlike the conventional wisdom regarding stabilization policies, optimal tax policies in our economy are procyclical. Relative to the non-cooperative setting, international tax policy cooperation requires more active tax policies (about two times) and generates large extra welfare gains (by about a third).
- | Author: United States Federal Reserve Board
- | Publisher: Bibliogov
- | Publication Date: Feb 06, 2013
- | Number of Pages: 36 pages
- | Binding: Paperback or Softback
- | ISBN-10: 1288713878
- | ISBN-13: 9781288713875
