Labour market rents and Irish industrial policy

This paper examines the issue of whether harmonising taxes across the trade d and nontraded sectors is desirable. Preferential treatment for the traded sector might be justified if either the output response of subsidies are h igher in the traded sector or if the jobs;generated in the traded sector ar e "better" than those in the non-traded sector I examine these two issues u sing a simple two sector small open economy model to analyse the first ques tion and input-output analysis to analyse the second. I conclude that there is no compelling argument for lower taxes on the traded sector.