IDEAS home Printed from https://ideas.repec.org/a/ere/journl/vxxviiy2008i1p81-115.html
   My bibliography  Save this article

An applied general equilibrium analysis of fiscal reforms to fight poverty in Mexico

Author

Listed:
  • Gaspar Núñez Rodríguez

    (Catedrático Investigador del Centro de Investigaciones Socio-Económicas (CISE) de la Universidad Autónoma de Coahuila (UAdeC) de México y miembro del Sistema Nacional de Investigadores (SNI) de México.)

  • Clemente Polo Andrés

    (Profesor del Departamento de Economía e Historia Económica de la Universidad Autónoma de Barcelona (UAB) de España.)

Abstract

The main goal of this paper is to analyze the consequences of two alternative ways of raising funds to finance poverty alleviation programs in Mexico: A Value Added Tax (VAT) reform and a personal income tax reform (IT). The impact of the reforms is analyzed with an applied general equilibrium model of the Mexican economy, calibrated using a 1996 Social Accounting Matrix. The model includes 18 production sectors, 10 representative households, the government, and the rest of the world. The cash transfers required to attain a fixed increase in the Equivalent Variation (EV) of the lowest income households are obtained either increasing effective VAT rates or IT rates. When all rates are scaled up by the same factor, the VAT reform generates a positive global EV considerably larger than the one obtained scaling the IT rates, though the latter diminishes (increases) lower (higher) income households’ contribution. Setting a uniform VAT rate results in a positive global EV considerably larger than the one obtained with a uniform IT. Moreover, the distribution gap increases in the latter case since the richest households receive the largest benefits.

Suggested Citation

  • Gaspar Núñez Rodríguez & Clemente Polo Andrés, 2008. "An applied general equilibrium analysis of fiscal reforms to fight poverty in Mexico," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 81-115, May.
    • Handle: RePEc:ere:journl:v:xxvii:y:2008:i:1:p:81-115
    as

    Download full text from publisher

    File URL: http://www.economia.uanl.mx/revistaensayos/xxvii/1/An-applied-general-equilibrium.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kehoe, Timothy J & Serra-Puche, Jaime, 1991. "A General Equilibrium Appraisal of Energy Policy in Mexico," Empirical Economics, Springer, vol. 16(1), pages 71-93.
    2. Kehoe, Timothy J. & Serra-Puche, Jaime & Solis, Leopoldo, 1984. "A general equilibrium model of domestic commerce in Mexico," Journal of Policy Modeling, Elsevier, vol. 6(1), pages 1-28, February.
    3. Shoven, John B. & Whalley, John, 1972. "A general equilibrium calculation of the effects of differential taxation of income from capital in the U.S," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 281-321, November.
    4. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
    5. Robinson, Sherman & Burfisher, Mary E. & Hinojosa-Ojeda, Raul & Thierfelder, Karen E., 1993. "Agricultural policies and migration in a U.S.-Mexico free trade area: A computable general equilibrium analysis," Journal of Policy Modeling, Elsevier, vol. 15(5-6), pages 673-701.
    6. Coady, David P. & Harris, Rebecca Lee, 2001. "Evaluating transfer programs within a general equilibrium framework," FCND briefs 110, International Food Policy Research Institute (IFPRI).
    7. Paul S. Armington, 1969. "A Theory of Demand for Products Distinguished by Place of Production (Une théorie de la demande de produits différenciés d'après leur origine) (Una teoría de la demanda de productos distinguiénd," IMF Staff Papers, Palgrave Macmillan, vol. 16(1), pages 159-178, March.
    8. Coady, David P. & Harris, Rebecca Lee, 2001. "Evaluating transfer programs within a general equilibrium framework," FCND discussion papers 110, International Food Policy Research Institute (IFPRI).
    9. Decaluwe, Bernard & Martens, Andre, 1988. "CGE modeling and developing economies: A concise empirical survey of 73 applications to 26 countries," Journal of Policy Modeling, Elsevier, vol. 10(4), pages 529-568.
    10. Kehoe, Timothy J. & Serra-Puche, Jaime, 1983. "A computational general equilibrium model with endogenous unemployment : An analysis of the 1980 fiscal reform in Mexico," Journal of Public Economics, Elsevier, vol. 22(1), pages 1-26, October.
    11. Löfgren, Hans & Harris, Rebecca Lee & Robinson, Sherman, 2001. "A standard computable general equilibrium (CGE) model in GAMS," TMD discussion papers 75, International Food Policy Research Institute (IFPRI).
    12. Taylor, J. Edward & Yunez-Naude, Antonio & Hampton, Steve, 1999. "Agricultural Policy Reforms and Village Economies: A Computable General-Equilibrium Analysis from Mexico," Journal of Policy Modeling, Elsevier, vol. 21(4), pages 453-480, July.
    13. Levy, Santiago, 1987. "A short-run general equilibrium model for a small, open economy," Journal of Development Economics, Elsevier, vol. 25(1), pages 63-88, February.
    Full references (including those not matched with items on IDEAS)

    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. Gaspar Núñez Rodríguez, 2015. "Modelo de equilibrio general aplicado para México y análisis de impuestos a la extracción de hidrocarburos," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 35-74, May.
    2. Atolia, Manoj & Kurokawa, Yoshinori, 2016. "The impact of trade margins on the skill premium: Evidence from Mexico," Journal of Policy Modeling, Elsevier, vol. 38(5), pages 895-915.
    3. Timothy J. Kehoe, 1996. "Social accounting matrices and applied general equilibrium models," Working Papers 563, Federal Reserve Bank of Minneapolis.
    4. Y. Qiang, 1999. "CGE Modelling and Australian Economics," Economics Discussion / Working Papers 99-04, The University of Western Australia, Department of Economics.
    5. Ball, Sheryl & Feltenstein, Andrew, 2001. "Bank failures and fiscal austerity: policy prescriptions for a developing country," Journal of Public Economics, Elsevier, vol. 82(2), pages 247-270, November.
    6. Zafar Iqbal & Rizwana Siddiqui, 2001. "Critical Review of Literature on Computable General Equilibrium Models," MIMAP Technical Paper Series 2001:09, Pakistan Institute of Development Economics.
    7. Romero, Carlos A., 2009. "Calibración de modelos de equilibrio general computado: Métodos y práctica usual [Calibration of CGE models: Methods and current practice]," MPRA Paper 17767, University Library of Munich, Germany.
    8. Ngee-Choon Chia & Wahba, Sadek & Whalley, John, 1992. "A general equilibrium based social policy model for Cote d'Ivoire," Policy Research Working Paper Series 925, The World Bank.
    9. M. Carmen Lima & M. Alejandro Cardenete, 2007. "The effects of European funds on a regional economy: an applied general equilibrium analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 14(11), pages 851-855.
    10. Suahasil Nazara & Sri Kusumastuti Rahayu, 2013. "Program Keluarga Harapan (PKH): Indonesian Conditional Cash Transfer Programme," Policy Research Brief 42, International Policy Centre for Inclusive Growth.
    11. Blake, Adam & Gomez-Plana, Antonio Gomez & Latorre Munoz, María C., 2005. "Macroeconomic effects of foreign direct investment in the Spanish economy," Conference papers 331357, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    12. Ahmed, Vaqar & O' Donoghue, Cathal, 2007. "CGE-Microsimulation Modelling: A Survey," MPRA Paper 9307, University Library of Munich, Germany.
    13. Mark Partridge & Dan Rickman, 2010. "Computable General Equilibrium (CGE) Modelling for Regional Economic Development Analysis," Regional Studies, Taylor & Francis Journals, vol. 44(10), pages 1311-1328.
    14. Bruno Théret & Didier Uri, 1988. "La courbe de Laffer dix ans après : un essai de bilan critique," Revue Économique, Programme National Persée, vol. 39(4), pages 753-808.
    15. Whalley, John & Xin, Xian, 2009. "Home and regional biases and border effects in Armington type models," Economic Modelling, Elsevier, vol. 26(2), pages 309-319, March.
    16. Zhai, Fan, 2008. "Armington Meets Melitz: Introducing Firm Heterogeneity in a Global CGE Model of Trade," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 575-604.
    17. Ayoki, Milton, 2017. "Estimating the Revenue Impacts of Tax Harmonisation," MPRA Paper 83548, University Library of Munich, Germany.
    18. Mahmood, Arshad & Marpaung, Charles O.P., 2014. "Carbon pricing and energy efficiency improvement -- why to miss the interaction for developing economies? An illustrative CGE based application to the Pakistan case," Energy Policy, Elsevier, vol. 67(C), pages 87-103.
    19. Decaluwe, B. & Patry, A. & Savard, L. & Thorbecke, E., 1999. "Poverty Analysis Within a General Equilibrium Framework," Papers 9909, Laval - Recherche en Politique Economique.
    20. Suahasil Nazara & Sri Kusumastuti Rahayu, 2014. "Program Keluarga Harapan (PKH): Programa Indonesio de Transferencia de Ingresos Condicionada," Policy Research Brief 42, International Policy Centre for Inclusive Growth.

    More about this item

    Keywords

    poverty alleviation; tax reforms; social accounting matrix; applied general equilibrium; equivalent variation;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

    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:ere:journl:v:xxvii:y:2008:i:1:p:81-115. 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: Dora María Vega Facio (email available below). General contact details of provider: https://edirc.repec.org/data/feualmx.html .

    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.