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The Empirical Analysis of Tax Reforms

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  • Mervyn A. King
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    Abstract

    Over the last decade increasing use has been made of individual household data to analyse the gains and losses from tax reform. Much attention has been paid to the econometric estimation of models of household responses to taxes. But these models yield valid estimates of the welfare consequences of tax changes only when the implied preference orderings are well behaved. This paper discusses the nature of such conditions in detail. Where there are rionlinearities in the budget constraint then two sets of "primal" and "dual" conditions must be satisfied. The analysis of these conditions yields suggestions for the specification of behavioural models and the use of individual-specific information in the observed data.

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    File URL: http://www.nber.org/papers/w1996.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1996.

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    Date of creation: Aug 1986
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    Publication status: published as Advances in Econometrics, 1988, ed. T. Bewely, Cambridge University Press: London
    Handle: RePEc:nbr:nberwo:1996

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    1. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-94, July.
    2. Wales, T J & Woodland, A D, 1980. "Sample Selectivity and the Estimation of Labor Supply Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(2), pages 437-68, June.
    3. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
    4. Mervyn A. King, 1983. "The Distribution of Gains and Losses from Changes in the Tax Treatment of Housing," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 109-138 National Bureau of Economic Research, Inc.
    5. King, M A & Dicks-Mireaux, L-D L, 1982. "Asset Holdings and the Life-Cycle," Economic Journal, Royal Economic Society, vol. 92(366), pages 247-67, June.
    6. King, Mervyn A., 1983. "Welfare analysis of tax reforms using household data," Journal of Public Economics, Elsevier, vol. 21(2), pages 183-214, July.
    7. Ahmad, Ehtisham & Stern, Nicholas, 1984. "The theory of reform and indian indirect taxes," Journal of Public Economics, Elsevier, vol. 25(3), pages 259-298, December.
    8. Leamer, Edward E, 1985. "Sensitivity Analyses Would Help," American Economic Review, American Economic Association, vol. 75(3), pages 308-13, June.
    9. Diewert, W E, 1981. "The Measurement of Deadweight Loss Revisited," Econometrica, Econometric Society, vol. 49(5), pages 1225-44, September.
    10. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers 255, Massachusetts Institute of Technology (MIT), Department of Economics.
    11. Daniel R. Feenberg & Harvey S. Rosen, 1983. "Alternative Tax Treatments of the Family: Simulation Methodology and Results," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 7-46 National Bureau of Economic Research, Inc.
    12. Burtless, Gary & Hausman, Jerry A, 1978. "The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiments," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1103-30, December.
    13. Mervyn A. King, 1980. "An econometric model of tenure choice and demand for housing as a joint decision," NBER Chapters, in: Econometric Studies in Public Finance, pages 137-159 National Bureau of Economic Research, Inc.
    14. King, Mervyn A., 1980. "An econometric model of tenure choice and demand for housing as a joint decision," Journal of Public Economics, Elsevier, vol. 14(2), pages 137-159, October.
    15. Ashenfelter, Orley & Heckman, James J, 1974. "The Estimation of Income and Substitution Effects in a Model of Family Labor Supply," Econometrica, Econometric Society, vol. 42(1), pages 73-85, January.
    16. Alan J. Auerbach & Mervyn A. King, 1984. "Taxation, Portfolio Choice, and Debt-Equity Ratios: A General Equilibrium Model," NBER Working Papers 0546, National Bureau of Economic Research, Inc.
    17. Heckman, James J, 1974. "Effects of Child-Care Programs on Women's Work Effort," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S136-S163, Part II, .
    18. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    19. Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, vol. 44(5), pages 979-99, September.
    20. Caves, Douglas W & Christensen, Laurits R, 1980. "Global Properties of Flexible Functional Forms," American Economic Review, American Economic Association, vol. 70(3), pages 422-32, June.
    21. Wales, Terence J., 1977. "On the flexibility of flexible functional forms : An empirical approach," Journal of Econometrics, Elsevier, vol. 5(2), pages 183-193, March.
    22. Deaton, Angus, 1981. "Optimal Taxes and the Structure of Preferences," Econometrica, Econometric Society, vol. 49(5), pages 1245-60, September.
    23. Kay, J. A., 1980. "The deadweight loss from a tax system," Journal of Public Economics, Elsevier, vol. 13(1), pages 111-119, February.
    24. Muellbauer, John, 1975. "Aggregation, Income Distribution and Consumer Demand," Review of Economic Studies, Wiley Blackwell, vol. 42(4), pages 525-43, October.
    25. Costas Meghir & David Phillips, 2008. "Labour supply and taxes," IFS Working Papers W08/04, Institute for Fiscal Studies.
    26. Samuelson, Paul A, 1974. "Complementarity-An Essay on the 40th Anniversary of the Hicks-Allen Revolution in Demand Theory," Journal of Economic Literature, American Economic Association, vol. 12(4), pages 1255-89, December.
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    Cited by:
    1. Rudiger Dornbusch, 1996. "How should central banks reduce inflation? conceptual issues (commentary)," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 93-103.
    2. Baccouche, Rafiq & Laisney, François, 1988. "Évaluation de six propositions de réforme de la TVA sur données microéconomiques," L'Actualité Economique, Société Canadienne de Science Economique, vol. 64(2), pages 178-208, juin.

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