A Microsimulation on Tax Reforms in LAC Countries: A New Approach Based on Full Expenditures
AbstractIn this article, we propose a new method to estimate price effects on micro cross-sectional data using full prices that take into account household domestic production. We use behavioral microsimulations by subpopulations to analyze the redistributive impact of changes on Value Added Tax (VAT) rates in Ecuador and Guatemala. Utility analysis is used to evaluate the consequences on households welfare caused by these tax reforms. The proposed model solves the crucial problem of price data availability in developing countries. The estimates of the full price elasticities highlight the importance of the substitution between time and monetary expenditures within the households domestic production function and show that traditional approaches only tell half of the story. In general, the utility estimates seem to be consistent as they have the expected sign and follow the same pattern of changes in consumption.
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Date of creation: Jul 2013
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Consumer demand; full prices; microsimulation; taxes; time-use; welfare;
This paper has been announced in the following NEP Reports:
- NEP-ACC-2013-11-09 (Accounting & Auditing)
- NEP-ALL-2013-11-09 (All new papers)
- NEP-CMP-2013-11-09 (Computational Economics)
- NEP-PBE-2013-11-09 (Public Economics)
- NEP-UPT-2013-11-09 (Utility Models & Prospect Theory)
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- Gardes, Francois & Duncan, Greg J. & Gaubert, Patrice & Gurgand, Marc & Starzec, Christophe, 2005. "Panel and Pseudo-Panel Estimation of Cross-Sectional and Time Series Elasticities of Food Consumption: The Case of U.S. and Polish Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 242-253, April.
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- François Gardes & Greg Duncan & Patrice Gaubert & Marc Gurgand & Christophe Starzec, 2005. "Panel and Pseudo-Panel Estimation of Cross-Sectional and Time Series Elasticities of Food Consumption: The Case of American and Polish Data," Post-Print hal-00176109, HAL.
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