The non-optimality of the Mexican indirect tax system
In: Fiscal Inclusive Development: Microsimulation Models for Latin America
This chapter starts with a review of the marginal tax reform methodology that was first advanced by Ahmad and Stern (1984), as well as its second-order variant introduced by Urzúa (2005). After that, it reviews some aspects of the estimation of demand systems, a topic that, although well known to applied econometricians, might be unfamiliar to practitioners. Finally, using an estimated demand system, the paper identifies marginal and second-order improvements in the current Mexican indirect tax system. For the non-experts, an appendix provides a computer code in Stata that can be used to estimate demand systems of the type considered here.
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- Crawford, Ian & Laisney, Francois & Preston, Ian, 2003.
"Estimation of household demand systems with theoretically compatible Engel curves and unit value specifications,"
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- Nicita, Alessandro, 2004. "Efficiency and equity of a marginal tax reform - income, quality, and price elasticities for Mexico," Policy Research Working Paper Series 3266, The World Bank. Full references (including those not matched with items on IDEAS)
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