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Analysis of the Changes in the Hungarian Tax System and Social Transfers between 2010 and 2014 Using a Behavioural Microsimulation Model

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  • Gergely Baksay

    (Hungarian National Bank)

  • Balázs Csomós

    (Hungarian National Bank)

Abstract

Using an updated microsimulation model developed earlier in the Hungarian National Bank, we estimate the macroeconomic, budgetary and labour market effects of government measures relating to taxes, social contributions, social transfers and gross wages since 2010. Compared to other studies, we take into account a more broad scope of measures, e.g. measures affecting gross wages and total labour cost directly. According to our estimations, the increase of the minimum wage and the so-called expected wage have fully compensated the low-income households of 2.3 million people already in the short-run for the loss of net income stemming from personal income tax and social contribution changes (especially for the abolition of tax credit).Taking into account social transfer reforms, the long-term macroeconomic effect of the measures is favourable: the level of employment may increase by approximately 2 percent, steady-state GDP level may go up by 1.5–2 and public deficit may decrease in the long run due to the government measures.

Suggested Citation

  • Gergely Baksay & Balázs Csomós, 2015. "Analysis of the Changes in the Hungarian Tax System and Social Transfers between 2010 and 2014 Using a Behavioural Microsimulation Model," Society and Economy, Akadémiai Kiadó, Hungary, vol. 37(supplemen), pages 29-64, December.
    • Handle: RePEc:aka:soceco:v:37:y:2015:i:supplement:p:29-64
    Note: The authors express their thanks to Péter Benczúr, Gábor Kátay, Gábor Kiss, Benedek Nobilis and András Svraka. The authors are responsible for every error that remained in the study.
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    References listed on IDEAS

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    1. Péter Benczúr & Gábor Kátay & Áron Kiss & Balázs Reizer & Mihály Szoboszlai, 2011. "Analysis of changes in the tax and transfer system with a behavioural microsimulation model," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 6(3), pages 15-27, October.
    2. Áron Kiss & Pálma Mosberger, 2015. "The elasticity of taxable income of high earners: evidence from Hungary," Empirical Economics, Springer, vol. 48(2), pages 883-908, March.
    3. Elek, Peter & Köllő, János & Reizer, Balázs & Szabó, Péter A., 2011. "Detecting Wage Under-reporting Using a Double Hurdle Model," IZA Discussion Papers 6224, Institute of Labor Economics (IZA).
    4. Péter Bakos & Péter Benczúr & Dora Benedek, 2008. "The Elasticity of Taxable Income: Estimates and Flat Tax Predictions using the Hungarian Tax Changes in 2005," RSCAS Working Papers 2008/32, European University Institute.
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    6. Gábor Kátay & Zoltán Wolf, 2004. "Investment Behavior, User Cost and Monetary Policy Transmission - the Case of Hungary," MNB Working Papers 2004/12, Magyar Nemzeti Bank (Central Bank of Hungary).
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    More about this item

    Keywords

    behavioural microsimulation; linked micro macro model; tax system; transfers;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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