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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| Format: | Article |
| Language: | English |
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Korea Development Institute
2007-12-01
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| Series: | KDI Journal of Economic Policy |
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| Online Access: | https://doi.org/10.23895/kdijep.2005.29.2.177 |
| _version_ | 1819265877771550720 |
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| author | Kim, Sung hyun H. |
| author_facet | Kim, Sung hyun H. |
| author_sort | Kim, Sung hyun H. |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-12-23T20:52:22Z |
| format | Article |
| id | doaj.art-e0a51dd459c944b997df94fc3bbbe220 |
| institution | Directory Open Access Journal |
| issn | 2586-2995 2586-4130 |
| language | English |
| last_indexed | 2024-12-23T20:52:22Z |
| publishDate | 2007-12-01 |
| publisher | Korea Development Institute |
| record_format | Article |
| series | KDI Journal of Economic Policy |
| spelling | doaj.art-e0a51dd459c944b997df94fc3bbbe2202022-12-21T17:31:37ZengKorea Development InstituteKDI Journal of Economic Policy2586-29952586-41302007-12-0129217719610.23895/kdijep.2005.29.2.177Dynamic Welfare Effects of Tax Reform: Case of KoreaKim, Sung hyun H.0Assistant Professor of Economics, Tufts UniversityThis 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.https://doi.org/10.23895/kdijep.2005.29.2.177tax reform(조세제도개편)revenue neutral(세수보존)Korea(한국)welfare(효용) |
| spellingShingle | Kim, Sung hyun H. Dynamic Welfare Effects of Tax Reform: Case of Korea KDI Journal of Economic Policy tax reform(조세제도개편) revenue neutral(세수보존) Korea(한국) welfare(효용) |
| title | Dynamic Welfare Effects of Tax Reform: Case of Korea |
| title_full | Dynamic Welfare Effects of Tax Reform: Case of Korea |
| title_fullStr | Dynamic Welfare Effects of Tax Reform: Case of Korea |
| title_full_unstemmed | Dynamic Welfare Effects of Tax Reform: Case of Korea |
| title_short | Dynamic Welfare Effects of Tax Reform: Case of Korea |
| title_sort | dynamic welfare effects of tax reform case of korea |
| topic | tax reform(조세제도개편) revenue neutral(세수보존) Korea(한국) welfare(효용) |
| url | https://doi.org/10.23895/kdijep.2005.29.2.177 |
| work_keys_str_mv | AT kimsunghyunh dynamicwelfareeffectsoftaxreformcaseofkorea |