Dynamic Welfare Effects of Tax Reform: Case of Korea
This paper analyzes welfare effects of revenue neutral tax reform using a small open economy dynamic general equilibrium model. We apply this model to the Korean data and examine welfare effects of various tax reforms; removal of capital income tax and/or labor income tax financed by consumption tax...
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| Published in | KDI Journal of Economic Policy pp. 177 - 196 |
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| Main Author | |
| Format | Journal Article |
| Language | English |
| Published |
한국개발연구원
01.12.2007
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| Subjects | |
| Online Access | Get full text |
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| Summary: | This paper analyzes welfare effects of revenue neutral tax reform using a small open economy dynamic general equilibrium model. We apply this model to the Korean data and examine welfare effects of various tax reforms; removal of capital income tax and/or labor income tax financed by consumption tax. We investigate both long run equilibrium and transitional dynamics. The results suggest that there are sizable welfare gains (1-3% of lifetime consumption) when factor income taxes are replaced by consumption tax. Overall gains are generated by long run gains despite short run welfare losses. However, there is welfare loss when capital income tax is replaced by labor income tax. KCI Citation Count: 1 |
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| Bibliography: | G704-001088.2007.29.2.004 |
| ISSN: | 2586-2995 2586-4130 |
| DOI: | 10.23895/kdijep.2007.29.2.177 |