Unité mixte de recherche 7235

Dynamic Effects of a Fiscal Reform in a Two-Sector Small Open Economy Model

Annual Congress of the European Economic Association (EEA)

27-31 August


Romain Restout, Olivier Cardi

We investigate the dynamic and steady-state effects of a change in consumption and labor tax rates (« social VAT ») in a two-sector small open economy with capital accumulation and endogenous employment. With fixed labor, the substitution of payroll tax on wage for consumption tax leaving unchanged the government budget constraint induces solely a rise in wage rate together with a fall in the marginal utility of wealth, leaving unchanged steady-state levels of variables. Instead, by extending the two-sector model by Turnovsky and Sen (1995) to elastic labor, we find that the fiscal policy crowds-in consumption and investment expenditure both in the short-run and the long-run and raises employment. The analytical tractability of the model allows us to characterize the transitional paths and the factors governing the impact and long-term effects. Interestingly, while steady-state changes remain almost qualitatively independent of sectoral capital intensities, sectoral capital-labor ratios matter in determining the size of long-run variations. Numerical exercises show that: [i] beneficial effects on labor-market can be large (depending on initial tax wedge, sectoral capital-labor ratios and elasticity of labor supply), and [ii] balanced-budget fiscal multipliers derived from the change in tax structure fall in the range 0.2-0.4 approximately as the elasticity of labor supply falls in the range between 0.5-1.


lundi 20 mars 2023

Law, Institutions and Economics in Nanterre (LIEN)

Ambre Nicolle (LMU Munich)

En salle 614 et en distanciel

Competition and value capture in platform markets: Implications for complementor strategy

mardi 21 mars 2023

Recherche et Economie et Socioéconomie Politique, des Institutions et des Régulations (RESPIR)

André Orléan (Paris School of Economics)

Toutes les valeurs sont des espèces d’un même genre

mercredi 22 mars 2023

Économies du monde musulman

Hicham Benamirouche (CREAD, Alger) | Mongi Marzoug (ancien ministre tunisien de l’énergie)

La sécurité énergétique dans la région MENA: une proposition d’évaluation | La transition énergétique dans les pays du MENA

jeudi 23 mars 2023


Benjamin Monnery

Salle 401-402 à 12h

Does the International Criminal Court Reduce Violence Against Civilians?

lundi 27 mars 2023

Professeurs invités

Axel Gautier

jeudi 30 mars 2023

Groupe de travail « Intelligence artificielle »

Paola Tubaro (CREST)

Salle : G614B

Artificial intelligence, labour transformations, and inconspicuous inequalities: women’s work on digital ‘micro-tasking’ platforms

jeudi 30 mars 2023


Morel Tien

Migration et synchronisation des cycles

lundi 3 avril 2023

Law, Institutions and Economics in Nanterre (LIEN)

Stefania Marcassa (CY Cergy)

En salle 614 et en distanciel


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