IDEAS home Printed from https://ideas.repec.org/a/eee/jpolmo/v41y2019i4p666-699.html
   My bibliography  Save this article

Macroeconomic and welfare effects of tax reforms in emerging economies: A case study of Morocco

Author

Listed:
  • Ghiaie, Hamed
  • Auclair, Gregory
  • Noah Ndela Ntsama, Jean Frederic

Abstract

This paper assesses the macroeconomic and welfare effects of fundamental tax reforms in an emerging/developing economy. We develop a dynamic general equilibrium model with structural and institutional characteristics of non-oil emerging and developing economies and apply the model to Morocco. The model’s simulations suggest that tax reforms imply complex trade-off between growth, government revenue, and equity. A comprehensive approach associated with better targeted social programs, broadens the tax base, removes tax distorsions, better distributes the tax burden, and mitigates adverse distributional effects (that is improves welfare) by making the tax system more progressive and reducing inequalities. For Morocco, a comprehensive tax reform package would involve (i) reducing tax exemptions, (ii) a broader-based property tax, (iii) a lower corporate tax rate, (iv) aligning the VAT rate on exempted goods and services to the standard rates, and (v) a better targeted social safety net. The paper indicates that such a reform package is growth-friendly, broad-based, progressive and has implications for existing gender biases.

Suggested Citation

  • Ghiaie, Hamed & Auclair, Gregory & Noah Ndela Ntsama, Jean Frederic, 2019. "Macroeconomic and welfare effects of tax reforms in emerging economies: A case study of Morocco," Journal of Policy Modeling, Elsevier, vol. 41(4), pages 666-699.
    • Handle: RePEc:eee:jpolmo:v:41:y:2019:i:4:p:666-699
    DOI: 10.1016/j.jpolmod.2019.02.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0161893819300080
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jpolmod.2019.02.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Waqas Ahmed & Farooq Pasha & Sajawal Khan & Muhammad Rehman, 2012. "Pakistan Economy DSGE Model with Informality," SBP Working Paper Series 47, State Bank of Pakistan, Research Department.
    2. Davide Furceri & Prakash Loungani & John Simon & Susan M. Wachter, 2016. "Global food prices and domestic inflation: some cross-country evidence," Oxford Economic Papers, Oxford University Press, vol. 68(3), pages 665-687.
    3. Paolo Verme & Khalid El-Massnaoui, 2017. "An Evaluation of the 2014 Subsidy Reforms in Morocco and a Simulation of Further Reforms," Natural Resource Management and Policy, in: Paolo Verme & Abdlekrim Araar (ed.), The Quest for Subsidy Reforms in the Middle East and North Africa Region, chapter 0, pages 63-90, Springer.
    4. Sean Dougherty & Octavio Escobar, 2013. "The Determinants of Informality in Mexico's States," OECD Economics Department Working Papers 1043, OECD Publishing.
    5. Richard M. Bird & Eric M. Zolt, 2014. "Taxation and inequality in the Americas: Changing the fiscal contract?," Chapters, in: Richard M. Bird & Jorge Martinez-Vazquez (ed.), Taxation and Development: The Weakest Link?, chapter 7, pages 193-237, Edward Elgar Publishing.
    6. Rachel M. Gisselquist & Danielle Resnick & Odd‐Helge Fjeldstad, 2014. "Tax And Development: Donor Support To Strengthen Tax Systems In Developing Countries," Public Administration & Development, Blackwell Publishing, vol. 34(3), pages 182-193, August.
    7. Roy Bahl & Sally Wallace, 2008. "Reforming the Property Tax in Developing Countries: A New Approach," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0819, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. Emran, M. Shahe & Stiglitz, Joseph E., 2005. "On selective indirect tax reform in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 599-623, April.
    9. Uribe, Martín & Schmitt-Grohé, Stephanie, 2015. "How Important Are Terms Of Trade Shocks?," CEPR Discussion Papers 10655, C.E.P.R. Discussion Papers.
    10. Ahmed, Waqas, 2012. "Pakistan Economy DSGE Model with Informality-The Empirics of Calibration," MPRA Paper 53167, University Library of Munich, Germany.
    11. David Domeij & Jonathan Heathcote, 2004. "On The Distributional Effects Of Reducing Capital Taxes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 523-554, May.
    12. Guillermo E. Perry & William F. Maloney & Omar S. Arias & Pablo Fajnzylber & Andrew D. Mason & Jaime Saavedra-Chanduvi, 2007. "Informality : Exit and Exclusion," World Bank Publications - Books, The World Bank Group, number 6730.
    13. Richard M. Bird & Jorge Martinez-Vazquez (ed.), 2014. "Taxation and Development: The Weakest Link?," Books, Edward Elgar Publishing, number 15750.
    14. Enid Slack & Richard M Bird, 2014. "The Political Economy of Property Tax Reform," OECD Working Papers on Fiscal Federalism 18, OECD Publishing.
    15. Nora Lustig & Florencia Amábile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Máximo Rossi , 2013. "The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru and Uruguay: An overview," Working Papers 315, ECINEQ, Society for the Study of Economic Inequality.
    16. International Monetary Fund, 2016. "Morocco: Selected Issues," IMF Staff Country Reports 2016/036, International Monetary Fund.
    17. Ahmed, Waqas & Rehman, Muhammad & Malik, Jahanzeb, 2013. "Quarterly Bayesian DSGE Model of Pakistan Economy with Informality," MPRA Paper 53168, University Library of Munich, Germany.
    18. Mr. Santiago Acosta Ormaechea, 2012. "Tax Composition and Growth: A Broad Cross-Country Perspective," IMF Working Papers 2012/257, International Monetary Fund.
    19. David Altig, 2001. "Simulating Fundamental Tax Reform in the United States," American Economic Review, American Economic Association, vol. 91(3), pages 574-595, June.
    20. Mohamed Karim & Amal Mansouri, 2015. "Taxation of Moroccan agriculture: an analysis of the sensitivity of the results of a dynamic computable general equilibrium model," Middle East Development Journal, Taylor & Francis Journals, vol. 7(1), pages 89-107, January.
    21. Nora Lustig & Florencia Amábile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Máximo Rossi , 2013. "The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay," Commitment to Equity (CEQ) Working Paper Series 1313, Tulane University, Department of Economics, revised Aug 2013.
    22. Gilbert E. Metcalf, 1994. "Life Cycle versus Annual Perspectives on the Incidence of a Value Added Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 8, pages 45-64, National Bureau of Economic Research, Inc.
    23. Nora Lustig & Florencia Amábile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Máximo Rossi , 2013. "The impact of taxes and social spending on inequality and poverty in Argentina, Bolivia, Brazil, Mexico, Peru, and Uruguay," Commitment to Equity (CEQ) Working Paper Series 13, Tulane University, Department of Economics, revised Aug 2013.
    24. Ravallion, Martin, 2010. "Poverty lines across the world," Policy Research Working Paper Series 5284, The World Bank.
    25. repec:idq:ictduk:13711 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hamed Ghiaie & Hamidreza Tabarraei & Asghar Shahmoradi, 2021. "Financial rigidities and oil‐based business cycles," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5183-5196, October.
    2. Bação, Pedro & Duarte, Joshua & Simões, Marta, 2024. "Social expenditure composition, inequality and growth in the OECD: Labour market policies are most effective," Journal of Policy Modeling, Elsevier, vol. 46(1), pages 75-89.
    3. El Khalifi, Ahmed & Ouakil, Hicham, 2024. "Aligning Public Spending and Taxes in the Moroccan Economy: A Dynamic General Equilibrium Model analysis," MPRA Paper 121891, University Library of Munich, Germany.
    4. Majumder, Amita & Ray, Ranjan & Santra, Sattwik, 2021. "Should commodity tax rates be uniform across regions in a heterogeneous country? Evidence from India," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1310-1331.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kalle Hirvonen & Giulia Mascagni & Keetie Roelen, 2018. "Linking taxation and social protection: Evidence on redistribution and poverty reduction in Ethiopia," International Social Security Review, John Wiley & Sons, vol. 71(1), pages 3-24, January.
    2. Kalle Hirvonen & Giulia Mascagni & Keetie Roelen, 2018. "Linking taxation and social protection: Evidence on redistribution and poverty reduction in Ethiopia," International Social Security Review, John Wiley & Sons, vol. 71(1), pages 3-24, January.
    3. Lahcen, Mohammed Ait, 2014. "DSGE models for developing economies: an application to Morocco," MPRA Paper 63404, University Library of Munich, Germany.
    4. Luis F. López-Calva & Nora Lustig & John Scott & Andrés Castañeda, 2013. "Gasto social, redistribución del ingreso y reducción de la pobreza en México: evolución y comparación con Argentina, Brasil y Uruguay," Commitment to Equity (CEQ) Working Paper Series 1317, Tulane University, Department of Economics, revised Mar 2014.
    5. Nora Lustig & Florencia Amábile & Marisa Bucheli & George Gray Molina & Sean Higgins & Miguel Jaramillo & Wilson Jiménez Pozo & Veronica Paz Arauco & Claudiney Pereira & Carola Pessino & Máximo Rossi , 2014. "El impacto del sistema tributario y del gasto social sobre la desigualdad y la pobreza en Argentina, Bolivia, Brasil, México, Perú y Uruguay: Un panorama general," Commitment to Equity (CEQ) Working Paper Series 1313S, Tulane University, Department of Economics.
    6. Panousi, Vasia, 2009. "Capital Taxation with Entrepreneurial Risk," MPRA Paper 24237, University Library of Munich, Germany.
    7. Marta González-Torrabadella & Josep Pijoan-Mas, 2006. "Flat tax reforms: a general equilibrium evaluation for Spain," Investigaciones Economicas, Fundación SEPI, vol. 30(2), pages 317-351, May.
    8. Juan Carlos Conesa & Sagiri Kitao & Dirk Krueger, 2009. "Taxing Capital? Not a Bad Idea after All!," American Economic Review, American Economic Association, vol. 99(1), pages 25-48, March.
    9. Lopez-Daneri, Martin, 2016. "NIT picking: The macroeconomic effects of a Negative Income Tax," Journal of Economic Dynamics and Control, Elsevier, vol. 68(C), pages 1-16.
    10. repec:idq:ictduk:13654 is not listed on IDEAS
    11. Cornia, Giovanni Andrea, 2014. "Income inequality in Latin America. Recent decline and prospects for its further reduction," Macroeconomía del Desarrollo 36852, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    12. Adnan Haider & Musleh ud Din & Ejaz Ghani, 2012. "Monetary Policy, Informality and Business Cycle Fluctuations in a Developing Economy Vulnerable to External Shocks," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 609-681.
    13. Mónica Patricia Ospina, 2014. "El efecto del gasto social en la distribución del ingreso: un análisis para economías latinoamericanas," Revista Ciencias Estratégicas, Universidad Pontificia Bolivariana, December.
    14. Sean Higgins & Claudiney Pereira, 2013. "The effects of Brazil's high taxation and social spending on the distribution of household income," Commitment to Equity (CEQ) Working Paper Series 1307, Tulane University, Department of Economics, revised May 2013.
    15. Roy Bahl, 2017. "Metropolitan city finances in Asia and the Pacific region: issues, problems and reform options," MPDD Working Paper Series WP/17/04, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    16. Conesa, Juan Carlos & Li, Bo & Li, Qian, 2020. "Welfare implications of switching to consumption taxation," Journal of Economic Dynamics and Control, Elsevier, vol. 120(C).
    17. Luis Huesca & Arturo Robles Valencia & Abdelkrim Araar, 2015. "Progressivity and decomposition of VAT in the Mexican border, 2014," Estudios Regionales en Economía, Población y Desarrollo. Cuadernos de Trabajo de la Universidad Autónoma de Ciudad Juárez. 25, Cuerpo Académico 41 de la Universidad Autónoma de Ciudad Juárez, revised 01 Jan 2015.
    18. Javier Díaz-Giménez & Josep Pijoan-Mas, 2006. "Flat Tax Reforms in the U.S.: A Boon for the Income Poor," Working Papers wp2006_0611, CEMFI.
    19. Nora Lustig, 2016. "Commitment to Equity Handbook. A Guide to Estimating the Impact of Fiscal Policy on Inequality and Poverty," Commitment to Equity (CEQ) Working Paper Series 1301, Tulane University, Department of Economics.
    20. Samantha Greenspun & Nora Lustig, 2013. "Gendered Fiscal Incidence Analysis. A Review of the Literature," Commitment to Equity (CEQ) Working Paper Series 76, Tulane University, Department of Economics.
    21. Sèna Kimm Gnangnon, 2023. "Trade costs and tax transition reform in developing countries," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(4), pages 941-977, October.

    More about this item

    Keywords

    Tax reform; Macro-structural policies; Distributional effects; Dynamic general equilibrium; Welfare;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jpolmo:v:41:y:2019:i:4:p:666-699. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505735 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.