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Revenue Elasticity of the Main federal Taxes in Mexico

Author

Listed:
  • Felipe J. Fonseca
  • Daniel Ventosa-Santaulària

Abstract

An inelastic tax system increases the uncertainty associated with tax revenue collection. This results in continuous short-term adjustments to maintain the stability of tax collection. In this paper, we estimate the revenue elasticity of the principal taxes in Mexico, finding a much greater elasticity than that found in previous studies. A cointegration model between the revenue and taxes is used which satisfies strong exogeneity, providing a basis for congruent and reliable projections. Using this model, the tax revenue projected for 2011 is much lower than the estimates prepared by Mexico’s federal government.

Suggested Citation

  • Felipe J. Fonseca & Daniel Ventosa-Santaulària, 2011. "Revenue Elasticity of the Main federal Taxes in Mexico," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 48(1), pages 89-111.
  • Handle: RePEc:ioe:cuadec:v:48:y:2011:i:1:p:89-111
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    File URL: http://www.economia.uc.cl/docs/01fonsA.pdf
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    References listed on IDEAS

    as
    1. Cárdenas, Óscar & Ventosa-Santaulària, Daniel & Gómez, Manuel, 2008. "Elasticidad ingreso de los impuestos federales en México. Efectos en la recaudación federal participable," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(298), pages 519-531, abril-jun.
    2. Ventosa-Santaulària Daniel & Gómez-Zaldívar Manuel, 2011. "Testing for a Deterministic Trend When There is Evidence of Unit Root," Journal of Time Series Econometrics, De Gruyter, pages 1-26.
    3. repec:ebl:ecbull:v:3:y:2008:i:61:p:1-14 is not listed on IDEAS
    4. Daniel Ventosa-Santaulària & José Eduardo Vera-Valdés, 2008. "Granger-Causality in the presence of structural breaks," Economics Bulletin, AccessEcon, vol. 3(61), pages 1-14.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Yılmaz, Engin & Süslü, Bora, 2015. "The Calculation of Weighted Price Elasticity of Tax: Turkey (1998-2013)," MPRA Paper 64417, University Library of Munich, Germany, revised 15 Apr 2015.
    2. Lawson, Nicholas & Spears, Dean, 2016. "What doesn't kill you makes you poorer: Adult wages and early-life mortality in India," Economics & Human Biology, Elsevier, pages 1-16.

    More about this item

    Keywords

    Federal taxes; long-term revenue elasticity; cointegration; strong exogeneity; forecasts;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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