Taxation of Income, Consumption, and Wages in an Open Economy
During the 1970s and 80s public finance economists devoted increasing attention to the taxation of consumption and wages as an attractive alternative to the existing income tax systems, which are widely believed to discourage savings and capital formation. Despite the ongoing internationalization of the western economies, most of these studies of the macroeconomic effects of tax reform have assumed a closed economy. As Slemrod (1988) has noted, economists have only recently begun to realize that the effects of tax policy may change markedly as the economy is opened up to international trade in goods and assets.
KeywordsLabor Supply Small Open Economy Financial Wealth Domestic Output Perfect Capital Mobility
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