Tax Efficiency in an Open Economy

ByThierry Pujol, W. R. M. Perraudin

October 1, 1990

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This note assesses the relative efficiency of different tax bases in an open economy. If terms of trade effects are large, lump-sum taxation may be inferior to distortionary consumption or wage taxes. This result is demonstrated analytically using a simple neoclassical model. An overlapping generations, general equilibrium, simulation model is then employed to show the empirical significance of the effects involved.

Subject: Consumption, Consumption taxes, Labor supply, Personal income tax, Terms of trade

Keywords: lump sum, WP

Pages:
14
Volume:
1990
DOI:
---
Issue:
094
Series:
Working Paper No. 1990/094
Stock No:
WPIEA0941990
ISBN:
9781451950663
ISSN:
1018-5941

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