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Impacto de una reforma fiscal sobre el bienestar económico en un ambiente de incertidumbre
[Impact of Tax Reform on Economic Welfare in an Uncertainty Environment]

Author

Listed:
  • Venegas-Martínez, Francisco
  • Rodríguez-Nava, Abigail
  • Palafox-Roca, Alfredo Omar

Abstract

This research is aimed at examining the impact of tax reform on economic welfare in an environment of uncertainty in a small open economy with a regime of flexible exchange rate. It is assumed that the economy is populated by identical rational risk-averse individuals. Unlike the typical assumption of infinitely-lived agents, it is assumed in this paper that with some (positive) probability agents are living in a given finite time. It also assumed that individuals are subject to tax rates on wealth, income and consumption. The distinctive feature of the proposed model is that macroeconomic fundamentals have a random dynamics that is modeled with diffusion processes or diffusion processes combined with Poisson jump processes.

Suggested Citation

  • Venegas-Martínez, Francisco & Rodríguez-Nava, Abigail & Palafox-Roca, Alfredo Omar, 2014. "Impacto de una reforma fiscal sobre el bienestar económico en un ambiente de incertidumbre [Impact of Tax Reform on Economic Welfare in an Uncertainty Environment]," MPRA Paper 57108, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:57108
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    References listed on IDEAS

    as
    1. Venegas-Martinez, Francisco, 2006. "Stochastic temporary stabilization: Undiversifiable devaluation and income risks," Economic Modelling, Elsevier, vol. 23(1), pages 157-173, January.
    2. Alesina, Alberto & Tabellini, Guido, 1989. "External debt, capital flight and political risk," Journal of International Economics, Elsevier, vol. 27(3-4), pages 199-220, November.
    3. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    4. Elder, Erick, 1999. "Dynamic Fiscal Policy with Regime-Duration Uncertainty: The Tax-Cut Case," Journal of Macroeconomics, Elsevier, vol. 21(1), pages 29-55, January.
    5. Agell, Jonas & Persson, Mats & Sacklen, Hans, 2004. "The effects of tax reform on labor supply, tax revenue and welfare when tax avoidance matters," European Journal of Political Economy, Elsevier, vol. 20(4), pages 963-982, November.
    6. Giovannini, Alberto, 1988. "The real exchange rate, the capital stock, and fiscal policy," European Economic Review, Elsevier, vol. 32(9), pages 1747-1767, November.
    7. Brennan, Geoffrey & McGuire, Thomas, 1975. "Optimal policy choice under uncertainty," Journal of Public Economics, Elsevier, vol. 4(2), pages 205-209, February.
    8. Venegas-Martinez, Francisco, 2001. "Temporary stabilization: A stochastic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 25(9), pages 1429-1449, September.
    9. Amilon, Henrik & Bermin, Hans-Peter, 2003. "Welfare effects of controlling labor supply: an application of the stochastic Ramsey model," Journal of Economic Dynamics and Control, Elsevier, vol. 28(2), pages 331-348, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fiscal policy; tax reform; income tax; consumption tax; stochastic modeling.;
    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

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