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The non-optimality of the Mexican indirect tax system

In: Fiscal Inclusive Development: Microsimulation Models for Latin America

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Author Info

  • Castañon-Herrera, Alberto

    (Benemérita Universidad Autónoma de Puebla)

  • Urzúa, Carlos M.

    ()
    (Tecnológico de Monterrey, Campus Ciudad de México)

Abstract

This chapter starts with a review of the marginal tax reform methodology that was first advanced by Ahmad and Stern (1984), as well as its second-order variant introduced by Urzúa (2005). After that, it reviews some aspects of the estimation of demand systems, a topic that, although well known to applied econometricians, might be unfamiliar to practitioners. Finally, using an estimated demand system, the paper identifies marginal and second-order improvements in the current Mexican indirect tax system. For the non-experts, an appendix provides a computer code in Stata that can be used to estimate demand systems of the type considered here.

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File URL: http://alejandria.ccm.itesm.mx/egap/documentos/CAP-2012-02.pdf
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This chapter was published in:

  • Urzúa, Carlos M. (ed.), 2012. "Fiscal Inclusive Development: Microsimulation Models for Latin America," EGAP Books, Tecnológico de Monterrey, Campus Ciudad de México, number 201202.
    This item is provided by Tecnológico de Monterrey, Campus Ciudad de México in its series EGAP Chapters with number 201202.

    Handle: RePEc:ega:capitu:201202

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    Web page: http://www.ccm.itesm.mx/egap/
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    Related research

    Keywords: Mexico; microsimulation models; marginal tax reform; Ahmad-Stern; social welfare; demand systems;

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    1. Deaton, Angus, 1987. "Estimation of own- and cross-price elasticities from household survey data," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 7-30.
    2. Ray, Ranjan, 1983. "Measuring the costs of children : An alternative approach," Journal of Public Economics, Elsevier, vol. 22(1), pages 89-102, October.
    3. Ian Crawford & François Laisney & Ian Preston, 2002. "Estimation of household demand systems with theoretically compatible Engel curves and unit value specifications," IFS Working Papers W02/17, Institute for Fiscal Studies.
    4. Nicita, Alessandro, 2004. "Efficiency and equity of a marginal tax reform - income, quality, and price elasticities for Mexico," Policy Research Working Paper Series 3266, The World Bank.
    5. Lahatte, Agénor & Miquel, Ruth & Laisney, François & Preston, Ian, 1997. "Demand Systems with Unit Values: A Comparsion of Two Specifications," ZEW Discussion Papers 97-24, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Bev Dahlby, 2008. "The Marginal Cost of Public Funds: Theory and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262042509, January.
    7. J. Scott Shonkwiler & Steven T. Yen, 1999. "Two-Step Estimation of a Censored System of Equations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 972-982.
    8. Jorge N. Valero Gil, 2006. "Estimación de elasticidades e impuestos óptimos a los bienes más consumidos en México," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 21(2), pages 127-176.
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