TEL  Vol.3 No.5 , October 2013
Consumption Tax, Nontraded Goods and Welfare
Author(s) Wataru Johdo*
ABSTRACT
This paper studies the welfare effects of a consumption tax rise based on the two-sector small open economy model of Obstfeld and Rogoff (1995) and Lane (1997). The main findings of our analysis are that 1) in the case of free trade, the consumption tax rise has no effect on welfare, 2) when there is the nontraded goods sector, the consumption tax rise has a negative effect on welfare, and 3) the larger the share of nontraded goods in consumption is, the larger the negative welfare effect of consumption tax will be.

Cite this paper
W. Johdo, "Consumption Tax, Nontraded Goods and Welfare," Theoretical Economics Letters, Vol. 3 No. 5, 2013, pp. 262-266. doi: 10.4236/tel.2013.35044.
References
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[9]   International Monetary Fund, “World Economic Outlook Database,” International Monetary Fund, Washington DC, 2013.

 
 
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