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U.S. Tax Policy and International Flows of Goods and Capital

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  • Ballard, Charles L.
  • Kang, Kiwon

Abstract

We integrate trade modeling and tax modeling, by evaluating the international spillover effects of changes in U.S. tax policy. The model is based primarily on Rutherford’s GTAPinGAMS, which is a static computational general-equilibrium model, using data from the Global Trade Analysis Project. Our model incorporates a labor/leisure choice and international cross-ownership of assets. Our simulations suggest that unilateral elimination of U.S. capital-income taxation generates capital inflows, and that they encourage more efficient use of the capital stock, but they will also generate negative effects on the terms of trade. Overall, the policy change generates welfare gains for the United States.

Suggested Citation

  • Ballard, Charles L. & Kang, Kiwon, 2001. "U.S. Tax Policy and International Flows of Goods and Capital," Conference papers 330907, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:330907
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