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Short- and long-run tax elasticities - the case of the Netherlands

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Author Info
Guido Wolswijk () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)

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Abstract

This paper provides estimates for the base elasticities of Dutch taxes, paying particular attention to differences between short-and long-term elasticities, and allowing for asymmetric adjustment. Estimates are presented for five tax categories for the period 1970-2005, after making appropriate corrections for effects of discretionary tax measures. The empirical results indicate that shortterm elasticities often are lower than long-term ones, notably when taxes are subdued. Consequently, shocks to tax revenues tend to be aggravated by the dynamics of short-term elasticities. Ignoring differences between short- and long-term elasticities contributes to revenue ‘surprises’ and an incorrect assessment of the fiscal stance. JEL Classification: H2, H62, H68.

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Paper provided by European Central Bank in its series Working Paper Series with number 763.

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Length: 41 pages
Date of creation: Jun 2007
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Handle: RePEc:ecb:ecbwps:20070763

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Keywords: Tax revenue; income elasticity; fiscal indicators; The Netherlands.;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Elena Angelini & Massimiliano Marcellino, 2007. "Econometric analyses with backdated data - unified Germany and the euro area," Working Paper Series 752, European Central Bank. [Downloadable!]
  2. Paul Levine & Joseph Pearlman & Richard Pierse, 2007. "Linear-quadratic approximation, external habit and targeting rules," Working Paper Series 759, European Central Bank. [Downloadable!]
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  3. Michele Ca’ Zorzi & Elke Hahn & Marcelo Sánchez, 2007. "Exchange Rate Pass-Through in Emerging Markets," Icfai University Journal of Monetary Economics, Icfai Press, vol. 0(4), pages 84-102, November.
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  4. Luca Benati & Haroon Mumtaz, 2007. "U.S. evolving macroeconomic dynamics - a structural investigation," Working Paper Series 746, European Central Bank. [Downloadable!]
  5. Gianni Amisano & Oreste Tristani, 2007. "Euro area inflation persistence in an estimated nonlinear DSGE model," Working Paper Series 754, European Central Bank. [Downloadable!]
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  6. Alistair Dieppe & Thomas Warmedinger, 2007. "Modelling intra- and extra-area trade substitution and exchange rate pass-through in the euro area," Working Paper Series 760, European Central Bank. [Downloadable!]
  7. Jukka Jalava & Ilja Kristian Kavonius, 2007. "Durable goods and their effect on household saving rations in the euro area," Working Paper Series 755, European Central Bank. [Downloadable!]
  8. Henrique S. Basso & Oscar Calvo-Gonzalez & Marius Jurgilas, 2007. "Financial dollarization - the role of banks and interest rates," Working Paper Series 748, European Central Bank. [Downloadable!]
  9. Koen Caminada & Kees Goudswaard, 1996. "Progression and revenue effects of income tax reform," International Tax and Public Finance, Springer, vol. 3(1), pages 57-66, January. [Downloadable!] (restricted)
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  1. Teresa Leal & Javier J. Pérez & Mika Tujula & Jean-Pierre Vidal, 2007. "Fiscal forecasting - lessons from the literature and challenges," Working Paper Series 843, European Central Bank. [Downloadable!]
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