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Computable General Equilibrium (CGE)Analysis of the Effects of Rising of Payroll Tax Rate in Iran Economy

Author

Listed:
  • Chehraghani, Ahmad

    (PhD in Economics, Shahid Chamran University of Ahvaz)

Abstract

The purpose of this paper is to investigate the economic effects of rising of payroll tax rate in Iran economy. For this purpose, the Computable General Equilibrium model (CGE) has been used. Data are taken from the Social Accounting Matrix (SAM) of Iran in 2011, prepared by the Parliamentary Research Center in 2015, which is the latest SAM in Iran. The data are analyzed in the form of standard computable general equilibrium model (CGE) by Lafgren et al. (2002) using GAMS software. The policy analysis has been done in the form of three scenarios of 5%, 10% and 15% increase in the payroll tax rate. The results show that increasing the payroll tax rate, increases the level of wages, reduces the level of employment, increases inflation, reduces GDP, increases government revenues and expenditures, reduces household expenditures and increases total absorption. Based on the above results, it is suggested that the government refrain from raising the payroll tax rate in the current condition of the Iran economy

Suggested Citation

  • Chehraghani, Ahmad, 2022. "Computable General Equilibrium (CGE)Analysis of the Effects of Rising of Payroll Tax Rate in Iran Economy," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 8(4), pages 285-318, March.
    • Handle: RePEc:ris:qjatoe:0255
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    More about this item

    Keywords

    Payroll Tax; Social Accounting Matrix (SAM); Computable General Equilibrium (CGE); Lofgren Model; Tax Rate;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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