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Marginal Tax Reform and the Specification of Consumer Demand Systems

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  • Madden, David

Abstract

This paper examines the conjecture that tax reform recommendations are not as sensitive to underlying consumer demand systems as are derived optimal tax rates. Tax reform recommendations for Ireland using the Ahmad-Stern model of indirect tax reform with different underlying consumer demand systems are examined. They are found to exhibit little sensitivity to the underlying deterministic demand system but they do display considerable sensitivity to dynamic specification. They also display sensitivity with regard to the imposition of the restrictions implied by utility maximization, especially symmetry. Copyright 1996 by Royal Economic Society.

Suggested Citation

  • Madden, David, 1996. "Marginal Tax Reform and the Specification of Consumer Demand Systems," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 556-567, October.
  • Handle: RePEc:oup:oxecpp:v:48:y:1996:i:4:p:556-67
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    Cited by:

    1. Alessandro Santoro, 2007. "Marginal Commodity Tax Reforms: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 21(4), pages 827-848, September.
    2. David Madden, 2015. "The Poverty Effects Of A ‘Fat‐Tax’ In Ireland," Health Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 104-121, January.
    3. Michael Savage, 2016. "Indirect tax reform and the specification of demand: the case of Ireland," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(2), pages 368-399, April.
    4. Scholz, Christian M., 1997. "Environmental tax reform and the double dividend: An econometric demand analysis," Kiel Working Papers 821, Kiel Institute for the World Economy (IfW).
    5. John Creedy, 2009. "The Personal Income Tax Structure: Theory and Policy," Department of Economics - Working Papers Series 1063, The University of Melbourne.
    6. Lyons, Sean & Mayor, Karen & Tol, Richard S.J., 2009. "Convergence of consumption patterns during macroeconomic transition: A model of demand in Ireland and the OECD," Economic Modelling, Elsevier, vol. 26(3), pages 702-714, May.
    7. Wasiu Adekunle Are, 2012. "Poverty-Reducing Directions of Indirect Marginal Tax Reforms in Ireland," Working Papers 201230, School of Economics, University College Dublin.
    8. Susan Olivia & John Gibson, 2008. "Household Energy Demand and the Equity and Efficiency Aspects of Subsidy Reform in Indonesia," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 21-40.
    9. John Creedy, 2010. "Personal Income Tax Structure: Theory and Policy," Chapters,in: Tax Reform in Open Economies, chapter 7 Edward Elgar Publishing.
    10. John Creedy & Nicolas Hérault, 2009. "Optimal Marginal Income Tax Reforms: A Microsimulation Analysis," Melbourne Institute Working Paper Series wp2009n23, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    11. Kenneth Clements & Wana Yang & Dongling Chen, 2001. "The matrix approach to evaluating demand equations," Applied Economics, Taylor & Francis Journals, vol. 33(8), pages 957-967.
    12. Andrej Cupák & Peter Tóth, 2017. "Measuring the Efficiency of VAT reforms: Evidence from Slovakia," Working and Discussion Papers WP 6/2017, Research Department, National Bank of Slovakia.

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