IDEAS home Printed from https://ideas.repec.org/a/mnb/finrev/v18y2019i4p55-76.html
   My bibliography  Save this article

Laffer Curves for Hungary

Author

Listed:
  • Péter Gábriel

    (Magyar Nemzeti Bank)

  • Lóránt Kaszab

    (Magyar Nemzeti Bank)

Abstract

The study uses a general equilibrium model calibrated for the Hungarian economy to estimate the Laffer curve of the labour tax rate. According to the results, the tax rate maximising budget revenues in the medium term is 55 per cent, while based on the model version taking into account the accumulation of human capital and capturing the longer-term effects of a tax cut, it is 40 per cent. The simulations showed that the self-financing rate of the reduction of the labour tax rate from its pre-crisis level to the level in 2011 is roughly 80 per cent over the medium term and that it is fully self-financing in the longer run. In the case of additional tax cuts, the self-financing rate diminishes somewhat in line with the lower tax rate at the outset, but remains high.

Suggested Citation

  • Péter Gábriel & Lóránt Kaszab, 2019. "Laffer Curves for Hungary," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 18(4), pages 55-76.
    • Handle: RePEc:mnb:finrev:v:18:y:2019:i:4:p:55-76
    as

    Download full text from publisher

    File URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-18-4-st3-gabriel-kaszab.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Patrick Fève & Julien Matheron & Jean-Guillaume Sahuc, 2018. "The Horizontally S-Shaped Laffer Curve," Journal of the European Economic Association, European Economic Association, vol. 16(3), pages 857-893.
    2. Egbert L. W. Jongen & Maaike Stoel, 2019. "The Elasticity of Taxable Labour Income in the Netherlands," De Economist, Springer, vol. 167(4), pages 359-386, December.
    3. Oguzhan Akgun & David Bartolini & Boris Cournède, 2017. "The capacity of governments to raise taxes," OECD Economics Department Working Papers 1407, OECD Publishing.
    4. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-572, June.
    5. Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-373, August.
    6. Jongen, Egbert L. W. & Stoel, Maaike, 2019. "The Elasticity of Taxable Labour Income in the Netherlands," IZA Discussion Papers 12090, Institute of Labor Economics (IZA).
    7. Ireland, Peter N., 1994. "Supply-side economics and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 559-571, June.
    8. Patrick Fève & Julien Matheron & Jean-Guillaume Sahuc, 2018. "The Horizontally S-Shaped Laffer Curve," Journal of the European Economic Association, European Economic Association, vol. 16(3), pages 857-893.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carina Neisser, 2021. "The Elasticity of Taxable Income: A Meta-Regression Analysis [The top 1% in international and historical perspective]," The Economic Journal, Royal Economic Society, vol. 131(640), pages 3365-3391.
    2. Michaël Sicsic, 2023. "L’élasticité de l’offre de travail et des revenus dans la littérature. Une analyse comparative des méthodes et des résultats sur données microéconomiques," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(4), pages 5-40.
    3. Michaël Sicsic, 2022. "Does labour income react more to income tax or means‐tested benefits reforms?," Fiscal Studies, John Wiley & Sons, vol. 43(3), pages 291-319, September.
    4. Hiroshi Gunji & Kazuki Hiraga & Kenji Miyazaki, 2024. "Tax Deduction Matters: Elasticities of the Laffer Curve, Taxable Income, and Tax Revenue," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 30(1), pages 1-19, February.
    5. Kazuki Hiraga & Kengo Nutahara, 2019. "Fragility in modeling consumption tax revenue," CIGS Working Paper Series 19-003E, The Canon Institute for Global Studies.
    6. Massenz, Gabriella, 2023. "On the behavioral effects of tax policy," Other publications TiSEM eb44a9f7-b859-480d-b2e4-4, Tilburg University, School of Economics and Management.
    7. Claudia Keser & David Masclet & Claude Montmarquette, 2020. "Labor Supply, Taxation, and the Use of Tax Revenues: A Real-Effort Experiment in Canada, France, and Germany," Public Finance Review, , vol. 48(6), pages 714-750, November.
    8. Shih‐Ying Wu, 2005. "The Tax Effect on Taxable Income from Privately Held Businesses," Southern Economic Journal, John Wiley & Sons, vol. 71(4), pages 891-912, April.
    9. Loukas Balafoutas & Adrian Beck & Rudolf Kerschbamer & Matthias Sutter, 2014. "The hidden costs of tax evasion: collaborative tax evasion in markets for expert services," Economics Working Papers ECO2014/01, European University Institute.
    10. Steven F. Lehrer & Nuno Sousa Pereira, 2008. "Worker Sorting, Health Insurance and Wages: Further Evidence from Displaced Workers in the United States," CEF.UP Working Papers 0804, Universidade do Porto, Faculdade de Economia do Porto.
    11. Fève, Patrick & Cahn, Christophe & Matheron, Julien, 2024. "The Long-Run Effects of Fiscal Rebalancing in a Heterogeneous-Agent Model," TSE Working Papers 24-1550, Toulouse School of Economics (TSE).
    12. Chen, Xiaoshan & Leith, Campbell & Ricci, Mattia, 2023. "Evaluating fiscal policy reforms using the fiscal frontier," Journal of Economic Dynamics and Control, Elsevier, vol. 155(C).
    13. Alba, Carlos & McKnight, Stephen, 2022. "Laffer curves in emerging market economies: The role of informality," Journal of Macroeconomics, Elsevier, vol. 72(C).
    14. Mbara, Gilbert & Tyrowicz, Joanna & Kokoszczynski, Ryszard, 2020. "Striking a balance: Optimal tax policy with labor market duality," Journal of Macroeconomics, Elsevier, vol. 66(C).
    15. Tomoyuki Nakajima & Shuhei Takahashi, 2020. "On the Non-Existence of a Zero-Tax Steady State with Incomplete Asset Markets," KIER Working Papers 1025, Kyoto University, Institute of Economic Research.
    16. Kazuki Hiraga & Kengo Nutahara, 2022. "Why is the Shape of the Laffer Curve for Consumption Tax Different from that for Labor Income Tax?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 78(3), pages 342-361.
    17. Jia, Zhiyang & Vattø, Trine Engh, 2021. "Predicting the path of labor supply responses when state dependence matters," Labour Economics, Elsevier, vol. 71(C).
    18. Raj Chetty, 2009. "Is the Taxable Income Elasticity Sufficient to Calculate Deadweight Loss? The Implications of Evasion and Avoidance," American Economic Journal: Economic Policy, American Economic Association, vol. 1(2), pages 31-52, August.
    19. Kristoffer Berg & Thor O. Thoresen, 2020. "Problematic response margins in the estimation of the elasticity of taxable income," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(3), pages 721-752, June.
    20. Henk-Wim Boer & Egbert L. W. Jongen, 2023. "Analysing tax-benefit reforms in the Netherlands using structural models and natural experiments," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(1), pages 179-209, January.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H0 - Public Economics - - General
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H6 - Public Economics - - National Budget, Deficit, and Debt

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mnb:finrev:v:18:y:2019:i:4:p:55-76. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Morvay Endre The email address of this maintainer does not seem to be valid anymore. Please ask Morvay Endre to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/mnbgvhu.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.