How taxes and real wage inflexibility interact to make trade deficits addictive: The tertiary and quaternary burdens of a transfer
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© 2016 World Scientific Publishing Company.Previous papers on the transfer problem pay scant attention to the problems caused by the distortionary taxation that extracts the gift from the donor nation or the cut in distortionary taxation that bestows the gift to the recipient nation. When combined with inflexibility in the real wage these changes in taxation and the transfer itself impose a considerable burden to the donor matched by a considerable blessing to the recipient. We explore these effects, and conclude that "The Great Rebalancing" between the US and China needed to cure the US trade deficit, i.e., to eliminate the transfer that China is making to the US may bestow a big burden on the US matched by a big blessing for China.
Published Version (Please cite this version)10.1142/S0217590816400269
Publication InfoTower, E; & Ye, YV (2016). How taxes and real wage inflexibility interact to make trade deficits addictive: The tertiary and quaternary burdens of a transfer. Singapore Economic Review, 61(2). 10.1142/S0217590816400269. Retrieved from https://hdl.handle.net/10161/13163.
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Professor of Economics
Professor Tower specializes in finance, computable general equilibrium modeling, macroeconomics, development economics, microeconomics, and managerial economics. He conducts a majority of his research within the study of trade and development, exploring a variety of variables from tariffs, quotas, and time zone arbitrage, to equities, mutual funds, and index mutual funds. Since he began publishing his work in 1965, he has contributed over 130 articles to leading academic journals and has had s