IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/331329.html
   My bibliography  Save this paper

Financing Poverty Alleviation: IVA vs ISR. An Applied General Equilibrium Approach

Author

Listed:
  • Núñez, Gaspar
  • Polo, Clemente

Abstract

The goal of this paper is to analyze two alternative ways of financing poverty alleviation in Mexico: 1) A Value Added Tax (IVA) reform, or 2) A Personal Income Tax (ISR) reform. Using an Applied General Equilibrium Model (AGEM) we evaluate reforms’ impact through the money measure in welfare change given by Hicks’ Equivalent Variation (EV). Results from four basic simulations, using a Social Accounting Matrix prepared by the authors, suggest that: A) An increase in IVA (maintaining its structure) generates a positive global EV, which is considerably greater than that obtained increasing the ISR (also maintaining its structure). B) However, given ISR’s progressive structure, increasing it reduces the distributive gap by diminishing lower income deciles’ contribution, and increasing highest income decile’s contribution. C) A uniform IVA results in a positive global EV considerably larger than the one obtained with a uniform ISR but, as we would expect, highest income decile’s households obtain a high benefit, so deepening the distributive gap.

Suggested Citation

  • Núñez, Gaspar & Polo, Clemente, 2005. "Financing Poverty Alleviation: IVA vs ISR. An Applied General Equilibrium Approach," Conference papers 331329, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331329
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/331329/files/1819.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    2. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-125, March.
    3. Daniel Trefler, 1997. "Immigrants and Natives in General Equilibrium Trade Models," NBER Working Papers 6209, National Bureau of Economic Research, Inc.
    4. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    5. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    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. Brücker, Herbert & Kohlhaas, Michael, 2004. "International Migration to Germany: A CGE-Analysis of Labour Market Impact," Conference papers 331276, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Carlsson, Mikael & Eriksson, Stefan & Gottfries, Nils, 2006. "Testing Theories of Job Creation: Does Supply Create Its Own Demand?," Working Paper Series 194, Sveriges Riksbank (Central Bank of Sweden).
    3. Brücker, Herbert & Hauptmann, Andreas & Jahn, Elke J. & Upward, Richard, 2014. "Migration and imperfect labor markets: Theory and cross-country evidence from Denmark, Germany and the UK," European Economic Review, Elsevier, vol. 66(C), pages 205-225.
    4. Marcello Estevao & Stacey Tevlin, 2000. "Do firms share their success with workers? The response of wages to product market conditions," Finance and Economics Discussion Series 2000-17, Board of Governors of the Federal Reserve System (U.S.).
    5. Baas, Timo & Brücker, Herbert, 2012. "The macroeconomic consequences of migration diversion: Evidence for Germany and the UK," Structural Change and Economic Dynamics, Elsevier, vol. 23(2), pages 180-194.
    6. Tito Boeri & Herbert Brücker, 2005. "Migration, Co-ordination Failures and EU Enlargement: Paper Presented at the 41st Economic Policy Panel in Luxembourg, 15/16 April 2005," Discussion Papers of DIW Berlin 481, DIW Berlin, German Institute for Economic Research.
    7. Juin-jen Chang & Chia-ying Liu & Hsiao-wen Hung, 2013. "Does Performance-Based Compensation Boost Economic Growth or Lead to More Income Inequality?," The Economic Record, The Economic Society of Australia, vol. 89(284), pages 72-82, March.
    8. Hian Teck Hoon & Margarita Katsimi & Gylfi Zoega, 2023. "Investment and the long swings of unemployment," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(3), pages 611-632, July.
    9. Jean‐Pierre Danthine & André Kurmann, 2007. "The Macroeconomic Consequences of Reciprocity in Labor Relations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 857-881, December.
    10. Danthine, Jean-Pierre & Kurmann, Andre, 2006. "Efficiency wages revisited: The internal reference perspective," Economics Letters, Elsevier, vol. 90(2), pages 278-284, February.
    11. Boeri, Tito & Brücker, Herbert, 2005. "Migration, Co-ordination Failures and EU Enlargement," IZA Discussion Papers 1600, Institute of Labor Economics (IZA).
    12. Muysken, J. & Zwick, Th., 1996. "A note on incentive wages with human capital formation," Research Memorandum 022, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    13. Gavrel, Frédéric, 2001. "Rotation de la main-d’oeuvre, allocations-chômage et emploi," L'Actualité Economique, Société Canadienne de Science Economique, vol. 77(4), pages 517-530, décembre.
    14. Hian Teck Hoon & Margarita Katsimi & Gylfi Zoega, 2018. "Investment, Current Account, and the Long Swings of Unemployment," Birkbeck Working Papers in Economics and Finance 1810, Birkbeck, Department of Economics, Mathematics & Statistics.
    15. Frank Scharr, 2005. "Tarifbindung, Rententeilung und Konzessionsverträge als Einflussgrößen der Lohnhöhe in Unternehmen : eine Untersuchung mit Mikrodaten für thüringische Firmen," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 39, November.
    16. Pannone, Andrea, 2010. "Production, unemployment and wage flexibility in an ICT-assisted economy: A model," Structural Change and Economic Dynamics, Elsevier, vol. 21(3), pages 219-230, August.
    17. Peter Hans Matthews, 2005. "Labor Discipline, Reputation and Underemployment Traps," Middlebury College Working Paper Series 0501, Middlebury College, Department of Economics.
    18. Committee, Nobel Prize, 2006. "Edmund Phelps's Contributions to Macroeconomics," Nobel Prize in Economics documents 2006-1, Nobel Prize Committee.
    19. Howard R. Vane & Chris Mulhearn, 2009. "Interview with Edmund S. Phelps," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 109-124, Summer.
    20. Manash Ranjan Gupta & Priya Brata Dutta, 2022. "Taxation, capital accumulation, environment and unemployment in an efficiency wage model," Journal of Economics, Springer, vol. 135(2), pages 151-198, March.

    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:ags:pugtwp:331329. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.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.