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Tax incentives and economic effects - a general equilibrium approach

  • Alexandre Porsse


  • Eduardo Haddad


Tax incentives are common instruments in regional policies used to attract new investments and promote increase in employment and income, but the impact on regional public finances is very controversial. This paper uses an interregional computable general equilibrium model for the Brazilian economy to evaluate the net effects of tax incentives on the regional government revenues. The model takes into account the structural relationships between two regions and the specific characteristics of the Brazilian federalism that affects regional public finances. The theoretical specification allows capturing indirect and induced effects of the new investments and the net output of such incentive policies for the regional government revenues.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p733.

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Date of creation: Aug 2005
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Handle: RePEc:wiw:wiwrsa:ersa05p733
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  1. Dixon, Peter B. & Parmenter, B.R., 1996. "Computable general equilibrium modelling for policy analysis and forecasting," Handbook of Computational Economics, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 1, pages 3-85 Elsevier.
  2. Guilhoto, Joaquim J.M., 1995. "Um modelo computável de equilíbrio geral para planejamento e análise de políticas agrícolas (PAPA) na economia brasileira
    [A computable general equilibrium model for planning and analysis of agricu
    ," MPRA Paper 42349, University Library of Munich, Germany.
  3. Perroni, Carlo & Rutherford, Thomas F., 1995. "Regular flexibility of nested CES functions," European Economic Review, Elsevier, vol. 39(2), pages 335-343, February.
  4. Daphne A. Kenyon, 1997. "Theories of interjurisdictional competition," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 13-36.
  5. Edson P. Domingues & Fernanda L.L. Leon & Eduardo Haddad, 2001. "Impacto das exportações sobre a estrutura setorial e de qualificação do emprego no Brasil," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 2(1), pages 259-290, January-J.
  6. Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, number comp1, March.
  7. Eduardo Haddad & Geoffrey Hewings, 1999. "The short-run regional effects of new investments and technological upgrade in the Brazilian automobile industry: An interregional computable general equilibrium analysis," Oxford Development Studies, Taylor & Francis Journals, vol. 27(3), pages 359-383.
  8. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
  9. Haddad, Eduardo A. & Domingues, Edson P. & Perobelli, Fernando S., 2002. "Regional effects of economic integration: the case of Brazil," Journal of Policy Modeling, Elsevier, vol. 24(5), pages 453-482, August.
  10. de Melo, Jaime & Robinson, Sherman, 1989. "Product differentiation and foreign trade in CGE models of small economies," Policy Research Working Paper Series 144, The World Bank.
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