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Confidence Intervals for Policy Reforms in Behavioural Tax Microsimulation Modelling

  • John Creedy

    ()

    (Department of Economics, The University of Melbourne)

  • Guyonne Kalb

    ()

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Hsein Kew

    ()

    (Department of Economics, The University of Melbourne)

This paper addresses the need for a measure of the uncertainty that is associated with the results calculated through tax policy behavioural microsimulation modelling. Deriving the analytical measure would be extremely complicated. Therefore, a simulated approach is proposed which generates a pseudo sampling distribution of aggregate measures based on the sampling distribution of the estimated labour supply parameters. This approach, which is very computer intensive, is compared to a more time-efficient approach where the functional form of the sampling distribution is assumed to be normal. The results show that in many instances the results from the two approaches are quite similar. The exception is when aggregate measures for minor types of payments, involving relatively small groups of the population, are examined.

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File URL: http://www.melbourneinstitute.com/downloads/working_paper_series/wp2004n32.pdf
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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2004n32.

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Length: 45 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:iae:iaewps:wp2004n32
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://www.melbourneinstitute.com/Email:


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  1. M. Keane & R. Moffitt, . "A structural model of multiple welfare program participation and labor supply," Institute for Research on Poverty Discussion Papers 1080-96, University of Wisconsin Institute for Research on Poverty.
  2. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
  3. Pudney, Stephen & Sutherland, Holly, 1994. "How reliable are microsimulation results? : An analysis of the role of sampling error in a U.K. tax-benefit model," Journal of Public Economics, Elsevier, vol. 53(3), pages 327-365, March.
  4. John Creedy & Guyonne Kalb, 2003. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Melbourne Institute Working Paper Series wp2003n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  5. Guyonne Kalb, 2002. "Estimation of Labour Supply Models for Four Separate Groups in the Australian Population," Melbourne Institute Working Paper Series wp2002n24, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  6. John Creedy & Guyonne Kalb & Hsein Kew, 2003. "Flattening the Effective Marginal Tax Rate Structure in Australia: Policy Simulations Using the Melbourne Institute Tax and Transfer Simulator," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 156-172.
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