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Dynamic Welfare Effects of Tax Reform: Case of Korea
- Source :
- KDI Journal of Economic Policy, Vol 29, Iss 2, Pp 177-196 (2007)
- Publication Year :
- 2007
- Publisher :
- Korea Development Institute, 2007.
-
Abstract
- 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.
Details
- Language :
- English, Korean
- ISSN :
- 25862995 and 25864130
- Volume :
- 29
- Issue :
- 2
- Database :
- Directory of Open Access Journals
- Journal :
- KDI Journal of Economic Policy
- Publication Type :
- Academic Journal
- Accession number :
- edsdoj.0a51dd459c944b997df94fc3bbbe220
- Document Type :
- article
- Full Text :
- https://doi.org/10.23895/kdijep.2005.29.2.177