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Influence of the Fiscal System on Income Distribution in Regions and Small Areas: Microsimulated CGE Model for Côte d'Ivoire

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  • Bédia F. Aka
  • Souleymane S. Diallo

Abstract

The objective of this paper is to examine how a small open economy such as Côte d’Ivoire (CI) can obtain growth-based internal tax resources, and how the tax system affects households and individuals through relative prices. A microsimulated CGE model is used to analyse the effects of an alternative tax system on households by utilizing a survey. It is postulated that the military and political crisis that started in 1999 with the first coup d’etat in Côte d’Ivoire is transitory and that CI has an internal tax policy capacity. This paper indicates that an alternative tax structure can reduce distortion in regional poverty, inequality for households, and in cities and small areas of the country. A model is formulated using Côte d’Ivoire’s 1998-based social accounting matrix and the 1998 population survey of 4,200 households. The main findings of this study are that the post-crisis tax policies envisioned by the government (reducing the tax rate on firms, reducing import taxes and increasing taxes on household income) result in an increase in poverty and inequality at the regional, city and small area levels.

Suggested Citation

  • Bédia F. Aka & Souleymane S. Diallo, 2011. "Influence of the Fiscal System on Income Distribution in Regions and Small Areas: Microsimulated CGE Model for Côte d'Ivoire," Research Papers RP_218, African Economic Research Consortium.
  • Handle: RePEc:aer:rpaper:rp_218
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