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GTAP Resource #5746

"Micro-founded tax policy effects in a heterogeneous-agent macro-model"
by d'Andria, Diego, Jason DeBacker, Richard W. Evans, Jonathan Pycroft and Magdalena Zachlod-Jelec


Abstract
Microsimulation models are increasingly used to calibrate macro models for tax policy analysis. Yet, their potential remains underexploited, especially in order to represent the non-linearity of the tax and social benefit system and interactions between capital and labour incomes which play a key role to understand behavioural effects. Following DeBacker et al. (2018b) we use a microsimulation model to provide the output with which to estimate the parameters of bivariate non-linear tax functions in a macro model. In doing so we make marginal and average tax rates bivariate functions of capital income and labour income. We estimate the parameters of tax functions in order to capture the most important non-linearities of the actual tax schedule, together with interaction effects between labour and capital incomes. To illustrate the methodology, we simulate a reduction in marginal personal income tax rates in Italy with a microsimulation model, translating the microsimulation results into the shock for a dynamic overlapping generations model. Our results show that this policy change affects differently households distinguished by age and ability type.


Resource Details (Export Citation) GTAP Keywords
Category: 2019 Conference Paper
Status: Published
By/In: forthcoming in JRC Working Papers on Taxation and Structural Reforms, No. 01/2019; Presented at the 22nd Annual Conference on Global Economic Analysis, Warsaw, Poland
Date: 2019
Version:
Created: Zachlod-Jelec, M. (4/11/2019)
Updated: Zachlod-Jelec, M. (5/29/2019)
Visits: 797
- Dynamic modeling
- Demographics
- Economic growth
- European Union


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