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General Equilibrium Effects of Lower Labor Tax Burden in Croatia

Author

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  • Ozana Nadoveza Tomislav Sekur Marija Beg

    (Department of Macroeconomics and Economic Development, University of Zagreb, Faculty of Economics and Business, Zagreb, Croatia)

Abstract

This paper examines the effects of lower labor tax burden in Croatia by using Computable general equilibrium (CGE) model. It is a 5-sector (households, firms, government, investors and foreigners) model and economy is disaggregated on three highly aggregated sectors. One of the major advantages of CGE modeling is the evaluation of the overall effects of policy changes, shocks and reforms in the economy. We do this by lowering taxes on labor and simulating changes of all endogenous variables in the model simultaneously. Lastly, we provide sensitivity analysis results. Our results suggest that it is possible to encourage domestic production by reducing taxes on labor, but the potential effects on unemployment should be revised as to get more accurate estimates. JEL Classification: C63, C68, H20

Suggested Citation

  • Ozana Nadoveza Tomislav Sekur Marija Beg, 2016. "General Equilibrium Effects of Lower Labor Tax Burden in Croatia," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 19(SCI), pages 1-13, December.
    • Handle: RePEc:zag:zirebs:v:19:y:2016:i:sci:p:1-13
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    References listed on IDEAS

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    Cited by:

    1. Bonga-Bonga, Lumengo & Erero, Jean Luc, 2019. "The Impact of the Dividend Tax in South Africa: A Dynamic CGE Model Analysis," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 72(2), pages 185-208.
    2. Lukáš Moravec & Gabriela Kukalová & Jakub Ječmínek & Luboš Žáček, 2018. "Czech Household Tax Burden Estimation," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 66(6), pages 1557-1564.
    3. Mitkova Veronika & Jánošová Miroslava, 2019. "The Tax Burden CGE Analysis for Slovakia and Slovenia," Naše gospodarstvo/Our economy, Sciendo, vol. 65(4), pages 35-46, December.
    4. Milan Deskar-Škrbiæ, 2018. "Dynamic effects of fiscal policy in Croatia: confronting New-Keynesian SOE theory with empirics," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 36(1), pages 83-102.

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    More about this item

    Keywords

    CGE; small open economy; Croatia; taxes on labor; general equilibrium effects;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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