The European Union has recently proposed sectoral tax differentiation as a policy to fight unemployment. The member countries are allowed to reduce the VAT rates on goods and services that are particularly labor intensive and price elastic. The paper provides a theoretical analysis of the...

The paper examines policy externalities between imperfectly competitive open economies where unemployment prevails in general equilibrium. We develop a two-country and two-sector model with monopolistic competition in the goods market and wage bargaining in the labor market. Policy externalities...

The arms length principle states that the transfer price between two associated enterprises should be the price that would be paid for similar goods in similar circumstances by unrelated parties dealing at arms length with each other. This paper examines the effect of the arm's length principle...