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Distribution, taxation and employment in an open economy

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Summary

If taxes on labour income are passed on in wages the balanced budget multiplier may be negative. The present paper analyses this problem from a theoretical point of view applying a linearized version of a model for the small open economy. The model is dynamic, because account is taken of capital accumulation. Short-run and long-run solutions are expressed in terms of fiscal policy variables, a wage push variable, the price level abroad and world demand. Numerical examples are supplemented to illustrate the analytical results.

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Authors and Affiliations

  1. Faculty of Economics, Tilburg University, Tilburg

    Theo van de Klundert

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  1. Theo van de Klundert
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Acknowledgement is due for his helpful comment to S.K. Kuipers

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van de Klundert, T. Distribution, taxation and employment in an open economy. De Economist 130, 9–37 (1982). https://doi.org/10.1007/BF02371708

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  • DOI: https://doi.org/10.1007/BF02371708

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