Xavier Labandeira (rede and Department of Applied Economics (Universidade de Vigo)) José M. Labeaga (FEDEA and Department of Economic Analysis II (UNED)) Miguel Rodríguez (rede and Department of Applied Economics (Universidade de Vigo))
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Most public policies have not only efficiency but also distributional effects. However, there is a kind of trade-off between modeling approaches suitable for calculating each one of these impacts on the economy. For the former, most of the studies have been conducted with general equilibrium models, whereas partial equilibrium models represent the main approach for distributional analysis. This paper proposes a methodology which enables us to carry out an analysis of the distributional and efficiency consequences of public policies. In order to do so, we have integrated a microeconomic household demand model and a computable general equilibrium model for the Spanish economy. We illustrate the advantages of this approach by simulating a revenue-neutral reform in Spanish indirect taxation, with a reduction of VAT and a simultaneous increase of energy taxes. The results show that the reform brings about significant efficiency and distributional effects, in some cases counterintuitive, and demonstrate the academic and social utility of this approximation.
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Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number
22.
Find related papers by JEL classification: C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply (the Commons)
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