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A dynamic micro-econometric simulation model for firms

Author

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  • Hovick Shahnazarian

    (Sveriges Riksbank, S-103 37 Stockholm/Sweden)

Abstract

The firm-based simulation model presented in this paper aims to help practical policy making, by providing a tool for analyzing the behavioural effects induced by changes in the tax code and for forecasting corporate tax revenues. To achieve this end, one of the key innovations adopted in the paper is the use of robust estimation techniques designed to ameliorate the undue impact of influential observations. The simulation results indicate that a statutory corporate tax rate reduction does not reduce the effective corporate tax rate to an equal extent because firms adjust their behaviour to new tax rules. The simulation also reveals that even though the macroeconomic environment is important for the taxes paid by the firm, it is not obvious that the effective tax rate for these firms may change because of the changed macro conditions.

Suggested Citation

  • Hovick Shahnazarian, 2011. "A dynamic micro-econometric simulation model for firms," International Journal of Microsimulation, International Microsimulation Association, vol. 4(1), pages 2-20.
    • Handle: RePEc:ijm:journl:v:4:y:2011:i:1:p:2-20
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    File URL: http://ima.natsem.canberra.edu.au/IJM/V4_1/Volume%204%20Issue%201/1_IJM_2008_03_Hovick%20Shahnazarian.pdf
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    References listed on IDEAS

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    1. Simon Benninga, 1989. "Numerical Techniques in Finance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262521415, December.
    2. Shyam-Sunder, Lakshmi & C. Myers, Stewart, 1999. "Testing static tradeoff against pecking order models of capital structure," Journal of Financial Economics, Elsevier, vol. 51(2), pages 219-244, February.
    3. Kanniainen, Vesa & Sodersten, Jan, 1995. "The importance of reporting conventions for the theory of corporate taxation," Journal of Public Economics, Elsevier, vol. 57(3), pages 417-430, July.
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    Cited by:

    1. De Socio, Antonio & Michelangeli, Valentina, 2017. "A model to assess the financial vulnerability of Italian firms," Journal of Policy Modeling, Elsevier, vol. 39(1), pages 147-168.
    2. Andonio De Socio & Valentina Michelangeli, 2015. "Modelling Italian firms� financial vulnerability," Questioni di Economia e Finanza (Occasional Papers) 293, Bank of Italy, Economic Research and International Relations Area.

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