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A general equilibrium evaluation of tax policies in Spain during the Great Recession

Author

Listed:
  • María Teresa Álvarez Martínez

    (Rutgers, The State University of New Jersey)

  • José Clemente Polo Andrés

    (Universidad Autónoma de Barcelona)

Abstract

The main goal of the paper is to assess the effects of several permanent tax rate hikes implemented by the Spanish Government in 2009 and 2010 to counteract the rapid increase of the public deficit and debt registered in 2009 and 2010. It uses a numerical general equilibrium model calibrated to a social accounting matrix elaborated by the authors for the year 2000. The effects of increases in excise, value added and personal income taxes are simulated separately and jointly. The results indicate that the extra revenues obtained from each tax figure are lower than ex-ante calculations estimated by the Government. Moreover, the reductions in the public deficit accomplished are considerably smaller due to general equilibrium effects, such as lower production levels, greater unemployment rates and higher prices and transfers paid by the Government. The joint results indicate the enormous difficulties the Government faces to close the deficit gap by raising taxes.

Suggested Citation

  • María Teresa Álvarez Martínez & José Clemente Polo Andrés, 2013. "A general equilibrium evaluation of tax policies in Spain during the Great Recession," Documentos de trabajo - Analise Economica 0053, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    • Handle: RePEc:edg:anecon:0053
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    Cited by:

    1. Aleksandar Vasilev, 2017. "VAT Evasion in Bulgaria: A General-Equilibrium Approach," Review of Economics and Institutions, Università di Perugia, vol. 8(2).

    More about this item

    Keywords

    Computable General Equilibrium Models; Tax Reforms; Public Deficit;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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