Institutional Affiliation: New York University
|Redistributing the Gains From Trade Through Progressive Taxation|
with Michael E. Waugh: w24784
Should a nation's tax system become more progressive as it opens to trade? Does opening to trade change the benefits of a progressive tax system? We answer these question within a standard incomplete markets model with frictional labor markets and Ricardian trade. Consistent with empirical evidence, adverse shocks to comparative advantage lead to labor income losses for import-competition-exposed workers; with incomplete markets, these workers are imperfectly insured and experience welfare losses. A progressive tax system is valuable, as it substitutes for imperfect insurance and redistributes the gains from trade. However, it also reduces the incentives for labor to reallocate away from comparatively disadvantaged locations. We find that optimal progressivity should increase with openness...
Published: Spencer G. Lyon & Michael E. Waugh, 2018. "Redistributing the gains from trade through progressive taxation," Journal of International Economics, vol 115, pages 185-202. citation courtesy of
|Redistributing the Gains from Trade through Progressive Taxation|
with Michael Waugh
in Trade and Labor Markets, Gordon H. Hanson and Stephen J. Redding, organizers
|Pareto Weights as Wedges in Two-Country Models|
with David Backus, Chase Coleman, Axelle Ferriere: w21773
In models with recursive preferences, endogenous variation in Pareto weights would be interpreted as wedges from the perspective of a frictionless model with additive preferences. We describe the behavior of the (relative) Pareto weight in a two-country world and explore its interaction with consumption and the real exchange rate.
Published: David Backus & Chase Coleman & Axelle Ferriere & Spencer Lyon, 2016. "Pareto weights as wedges in two-country models," Journal of Economic Dynamics and Control, . citation courtesy of