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A dynamic general equilibrium model for tax policy analysis in Colombia

  • Hernandez, Gustavo Adolfo
  • Light, Miles
  • Rutherford, Thomas
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    The paper documents a dynamic general equilibrium model for Colombia based on national accounts from 1999. The paper is part of a project intended to develop a capacity for the the design, specification, and application of computable models within the Colombian Ministry of Finance and Department of National Planning. Our analytical framework includes both forwardlooking expectations and Harris-Todaro labor markets. In the present paper we compare numerical results from the dynamic model with simpler static and steady-state formulations to highlight the importance of transitional effects in evaluating tax policy reform. Our applications include measurement of the marginal cost of funds from different tax bases and the evaluation of discrete changes in tariff structure. The structure of the labor and intermediate credit markets have important implications for the ranking alternative tax reform proposals.

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    File URL: http://mpra.ub.uni-muenchen.de/28435/1/MPRA_paper_28435.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 28435.

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    Date of creation: May 2002
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    Handle: RePEc:pra:mprapa:28435
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    1. Thomas F. Rutherford & David G. Tarr, 2003. "Regional Trading Arrangements for Chile: do the Results Differ with a Dynamic Model?," Economie Internationale, CEPII research center, issue 94-95, pages 261-281.
    2. Thomas F. Rutherford & Miles K. LIGHT, 2002. "A General Equilibrium Model for Tax Policy Analysis in Colombia: The MEGATAX Model," ARCHIVOS DE ECONOMÍA 011291, DEPARTAMENTO NACIONAL DE PLANEACIÓN.
    3. Hansen, Terje & Koopmans, Tjalling C., 1972. "On the definition and computation of a capital stock invariant under optimization," Journal of Economic Theory, Elsevier, vol. 5(3), pages 487-523, December.
    4. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
    5. Rutherford, Thomas F. & Tarr, David G., 2002. "Trade liberalization, product variety and growth in a small open economy: a quantitative assessment," Journal of International Economics, Elsevier, vol. 56(2), pages 247-272, March.
    6. John Hutton & Anna Ruocco, 1999. "Tax Reform and Employment in Europe," International Tax and Public Finance, Springer, vol. 6(3), pages 263-287, August.
    7. Dantzig, George B. & Manne, Alan S., 1974. "A complementarity algorithm for an optimal capital path with invariant proportions," Journal of Economic Theory, Elsevier, vol. 9(3), pages 312-323, November.
    8. Lau, Morten I. & Pahlke, Andreas & Rutherford, Thomas F., 2002. "Approximating infinite-horizon models in a complementarity format: A primer in dynamic general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 26(4), pages 577-609, April.
    9. Todaro, Michael P, 1969. "A Model for Labor Migration and Urban Unemployment in Less Developed Countries," American Economic Review, American Economic Association, vol. 59(1), pages 138-48, March.
    10. Ferris, Michael C. & Munson, Todd S., 2000. "Complementarity problems in GAMS and the PATH solver," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 165-188, February.
    11. Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2002. "Trade Policy Options for Chile: The Importance of Market Access," World Bank Economic Review, World Bank Group, vol. 16(1), pages 49-79, June.
    12. Hatta, Tatsuo, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Wiley Blackwell, vol. 44(1), pages 1-21, February.
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