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Counterfactual Assessment in the Design of Tax Reforms: Model Decomposition of Revenue and Redistribution Effects

Author

Listed:
  • Nuria Badenes Plá

    (Instituto de Estudios Fiscales)

  • Borja Gambau Suelves

    (Analistas Financieros Internacionales (Afi), RedEv and Universidad Nacional de Educación a Distancia)

  • José M. Labeaga

    (Universidad Nacional de Educación a Distancia)

Abstract

In this paper, we propose a methodology for the evaluation of tax reforms through the design of counterfactual scenarios using Euromod. For this purpose, we develop two theorical model decompositions to explain the differences in tax revenue collection and the redistributive impact. We provide empirical evidence by designing a tax reform in Spain based on the French personal income tax. The approach can explain the isolated causes of differences based on the contribution of the tax system design and the income distribution. This result could help determining whether policy recommendations should focus on pre-distribution or redistribution.

Suggested Citation

  • Nuria Badenes Plá & Borja Gambau Suelves & José M. Labeaga, 2023. "Counterfactual Assessment in the Design of Tax Reforms: Model Decomposition of Revenue and Redistribution Effects," Hacienda Pública Española / Review of Public Economics, IEF, vol. 245(2), pages 179-208, June.
    • Handle: RePEc:hpe:journl:y:2023:v:245:i:2:p:179-208
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    References listed on IDEAS

    as
    1. Kathy Hayes & Peter Lambert & Daniel Slottje, "undated". "Evaluating Impact Effects of Tax Reforms," Discussion Papers 93/10, Department of Economics, University of York.
    2. Lambert, Peter J, 1993. "Evaluating Impact Effects of Tax Reforms," Journal of Economic Surveys, Wiley Blackwell, vol. 7(3), pages 205-242, September.
    3. Gerlinde Verbist & Francesco Figari, 2014. "The Redistributive Effect and Progressivity of Taxes Revisited: An International Comparison across the European Union," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(3), pages 405-429, September.
    4. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
    5. Peter J. Lambert & Runa Nesbakken & Thor O. Thoresen, 2020. "A Common Base Answer to the Question “Which Country Is Most Redistributive?”," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(4), pages 1467-1479, October.
    6. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, International Microsimulation Association, vol. 1(6), pages 4-26.
    7. Jonathan Haughton & Shahidur R. Khandker, 2009. "Handbook on Poverty and Inequality," World Bank Publications - Books, The World Bank Group, number 11985.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Tax reforms; Counterfactual; Evaluation; Microsimulation; Euromod.;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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