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Benefits and problems of linking micro and macro models - evidence from a flat tax analysis

  • Peichl, Andreas

The aim of this paper is to describe the state-of-the-art in simulation and to illustrate benefits and problems of linking micro and macro models by analysing flat tax proposals for Germany. The analysis shows that a personal income flat tax can indeed overcome the fundamental equity efficiency trade-off while simultaneously increasing the tax revenue. However, this result does not hold for a flat tax combining a personal income flat tax with a corporate cash flow flat tax, even when allowing for an ex-post loss in revenue as the top of the distribution still gains the most.

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2009-02.

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Date of creation: 28 Jan 2009
Date of revision:
Publication status: published
Handle: RePEc:ese:iserwp:2009-02
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