Income Tax Reductions in Production Networks

13 Pages Posted: 19 Jul 2022

See all articles by Chunyang Fu

Chunyang Fu

Chinese Academy of Sciences (CAS) - School of Economics and Management

Miao Li

Southwestern University of Finance and Economics (SWUFE)

Bin Wang

School of Economics, Jinan University

Date Written: July 6, 2022

Abstract

We analytically characterize the comparative statics of the macroeconomy after in- come tax reductions in which productions are organized in networks. We contribute to the literature by showing that the sectoral income tax reductions’s first-order effect on the GDP is given by a sufficient statistics: the product of the sectoral labor demand elasticity and sectoral Domar weight minus the sectoral labor share in the total labor supply. Around the efficient economy, the first-order effect is zero as other real distor- tions in the literature.

Keywords: Production Networks; Income Tax Reductions

JEL Classification: D57; E32; H24

Suggested Citation

Fu, Chunyang and Li, Miao and Wang, Bin, Income Tax Reductions in Production Networks (July 6, 2022). Available at SSRN: https://ssrn.com/abstract=4155277 or http://dx.doi.org/10.2139/ssrn.4155277

Chunyang Fu

Chinese Academy of Sciences (CAS) - School of Economics and Management ( email )

No.80, Zhongguancun East Road, Haidian District
Beijing
China

Miao Li

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Bin Wang (Contact Author)

School of Economics, Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China
510632 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
112
Abstract Views
322
Rank
455,390
PlumX Metrics