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Joint S. C. Tsiang Macroeconomics & Public Economics Workshop: Ali Shourideh

Thursday, October 4, 2018 at 11:40am to 1:10pm

Uris Hall, 498

Ali Shourideh - Carnegie Mellon University

Inequality, Redistribution, and Optimal Trade Policy: A Public Finance Approach (joint w/Roozbeh Hosseini)

Abstract:  In this paper, we explore the relationship between optimal trade and redistributive policies.  In particular, in an environment with input-output linkages where international trade affects the relative wages and the reallocation of workers across various sectors is frictional, we study how income taxes and trade policies should be designed in order to balance the efficiency gains from trade with the costs associated with the resulting increased inequality.  We show that when personal income taxes can depend on workers sectoral choices, free trade is optimal. However, when personal income tax only depend on income, production must be distorted. We show that these distortions have two general properties: first, they are independent of the network structure of trade and trade elasticities; second, they must take the form of value-added taxes (VAT). Finally, in a quantitative version of our model, we show that sector-specific transfers must be large and absent such taxes, distortion to trade are significant. These results have implications for design of trade assistance programs and trade agreements.

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Event Type

Class/ Workshop

Departments

Economics

Tags

economics, EconSeminar, EconMacro, EconPublic

Hashtag

#CornellEcon

Contact E-Mail

alg5@cornell.edu

Contact Name

Amy Moesch

Contact Phone

607-255-5617

Speaker

Ali Shourideh

Speaker Affiliation

Carnegie Mellon University

Open To

Cornell Economics Community (List Serve Members)