We use a two-sector open economy model with an imperfectly competitive non traded sector to investigate the dynamic and steady-state effects of three tax reforms: [i] two revenue-neutral tax reforms shifting the tax burden from labor to consumption taxes and [ii] one labor tax reform keeping the...

Using a panel of eighteen OECD countries over the period 1970-2015, our evidence reveals that labor growth originates from non-traded industries while real GDP growth is uniformly distributed across sectors following a government spending shock. A rationale behind these two findings lies in...