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The Poverty and Equity Implications of A Rise in the Value Added Tax: A Microeconomic Simulation for Lebanon


  • Nisreen Salti

    () (American University of Beirut)

  • Jad Chaaban


This paper examines the impact of a rise in the Value Added Tax (VAT) on poverty and inequality in Lebanon. To this end, the paper develops an empirical model based on consumer demand theory and uses only household survey data on expenditures and spatial price indexes. The simulation results — using an Almost Ideal Demand System — show that the projected VAT rate increases will have a limited impact on extreme poverty, due to the mostly progressive nature of current exemptions. However, overall poverty will be significantly affected, as households just above the national poverty line may fall into poverty as a result.

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  • Nisreen Salti & Jad Chaaban, 2009. "The Poverty and Equity Implications of A Rise in the Value Added Tax: A Microeconomic Simulation for Lebanon," Working Papers 483, Economic Research Forum, revised Apr 2009.
  • Handle: RePEc:erg:wpaper:483

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    References listed on IDEAS

    1. David Locke Newhouse & Daria V Zakharova, 2007. "Distributional Implications of the VAT Reform in the Philippines," IMF Working Papers 07/153, International Monetary Fund.
    2. Deaton, Angus, 1990. "Price elasticities from survey data : Extensions and Indonesian results," Journal of Econometrics, Elsevier, vol. 44(3), pages 281-309, June.
    3. Jad Chaaban & Alban Thomas, 2008. "A Structural Model for Evaluating the Sector-specific Impacts of Preferential Trade Agreements," Journal of Industry, Competition and Trade, Springer, vol. 8(1), pages 73-88, March.
    4. Juan Prieto-Rodriguez & Desiderio Romero-Jordan & Jose Felix Sanz-Sanz, 2004. "Is A Tax Cut On Cultural Goods Consumption Actually Desirable?:A Microsimulation Analysis," Public Economics 0402001, EconWPA, revised 06 Feb 2004.
    5. Howard Handy, 1998. "Egypt; Beyond Stabilization. Toward a Dynamic Market Economy," IMF Occasional Papers 163, International Monetary Fund.
    6. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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    Cited by:

    1. Zsombor Cseres-Gergely & Gyorgy Molnar & Tibor Szabo, 2017. "Expenditure responses, policy interventions and heterogeneous welfare effects in Hungary during the 2000s," IEHAS Discussion Papers 1704, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

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