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The labour market effects of VAT harmonisation in a multicountry AGE model

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  • Duncan, Alan
  • Hutton, John
  • Laroui, Fouad
  • Ruocco, Anna

Abstract

This paper considers the sensitivity of policy simulation to the specification of the labour market in an Applied General Equilibrium (AGE) model of the European Union. We consider a variety of adjustments to the labour market, including the introduction of labour supply heterogeneity and involuntary unemployment, and examine how those adjustments influenae the simulated impact of a move to European VAT harmonisation. Empirical results indicate that the precise mechanism by which unemployment is factored into the AGE model has important consequences for the price, quantity and welfare effects following the policy reform.

Suggested Citation

  • Duncan, Alan & Hutton, John & Laroui, Fouad & Ruocco, Anna, 1997. "The labour market effects of VAT harmonisation in a multicountry AGE model," Tübinger Diskussionsbeiträge 112, University of Tübingen, School of Business and Economics.
    • Handle: RePEc:zbw:tuedps:112
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    References listed on IDEAS

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    3. Mercenier, J., 1992. "Can '1991' Reduce Unemployment in Europe? On Welfare and Employment Effects of Europe's Move to Single Market," Cahiers de recherche 9222, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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    5. Smith, Stephen, 1993. "'Subsidiarity' and the Co-ordination of Indirect Taxes in the European Community," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 9(1), pages 67-94, Spring.
    6. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
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