nep-cmp New Economics Papers
on Computational Economics
Issue of 2008‒05‒24
four papers chosen by
Stan Miles
Thompson Rivers University

  2. Analysing the Effects of Tax-benefit Reforms on Income Distribution: A Decomposition Approach By Olivier Bargain; Tim Callan
  3. Would a Legal Minimum Wage Reduce Poverty? : A Microsimulation Study for Germany By Kai-Uwe Müller; Viktor Steiner
  4. Effects of Flat Tax Reforms in Western Europe on Equity and Efficiency By Alari Paulus; Andreas Peichl

  1. By: Al-Amin, Abul Quasem; Jaafar, Abdul Hamid; Siwar, Chamhuri
    Abstract: Environmental pollution is now a serious problem in many developing countries. One approach to mitigate the problem is to implement various pollution control policies. However, due to a lack of adequate quantitative models, the economic impacts and effectiveness of many pollution control policies are still unknown. Therefore, there is a greater need to know whether economic liberalization, trade, environment and social welfare can be joined in one direction under environmental taxation and policies. Empirical studies for developed countries reveal that imposition of a carbon tax would decrease CO2 emissions significantly and might not dramatically reduce economic growth. To our knowledge there has not been any research done to simulate the economic impact of emission control policies in Malaysia. Studying the potential economic impact of emission control policies is very important because inappropriate policies that reduce carbon emission may at the same time reduce highly economic growth. It is thus important to find the correct pollution tax that could be imposed such that environmental pollution is reduced at the same time does not dampen economic growth. The method developed for this study is applied computable general equilibrium model (MYCGE) for imposing environmental taxation policies in the Malaysian economy. Three simulations were carried out using a Malaysian Social Accounting Matrix. The first simulation is related to the trade based and the last two are carbon based simulations. The model results indicate that further trade liberalization is not sensitive in the Malaysian economy. Particularly, the reasons could be attributed to the fact that Malaysian export duty is already low and Malaysian trade policy already highly liberalized. The carbon tax policy illustrates that a 1.21 percent reduction of carbon emission (via carbon tax) reduces the nominal GDP by 0.82 percent and exports by 2.08 percent; a 2.34 percent reduction of carbon emission reduces the nominal GDP by 1.90 percent and exports by 3.97 percent and a 3.40 percent reduction of carbon emission reduces the nominal GDP by 3.17 percent and exports by 5.707 percent.
    Keywords: Trade; Air Emission; Environmental General Equilibrium; Malaysian Economy
    JEL: C68 Q5 B22
    Date: 2008–05–16
  2. By: Olivier Bargain (School of Economics, Univeristy College Dublin, CHILD & IZA Bonn); Tim Callan (ESRI)
    Abstract: To assess the impact of tax-bene?t policy changes on income distribution over time, we suggest a methodology based on counterfactual simulations. We start by decomposing changes in inequal- ity/poverty indices into three contributions: reforms of the tax-bene?t structure (rules, rates, etc.), changes in nominal levels of market incomes and tax-bene?t parameters (bene?t amounts, tax bands, etc.), and all other changes in the underlying population (market income inequality, demographic composition, employment level, etc.). Then, the decomposition helps to extract an absolute measure of the impact of tax-bene?t changes on inequality when evaluated against a distributionally-neutral benchmark, i.e. a situation where tax-bene?t parameters are adjusted in line with income growth. We apply this measure to assess recent policy changes in twelve European countries. Finally, the full decomposition allows quantifying the relative role of policy changes compared to all other fac- tors. We provide an illustration on France and Ireland and check the sensitivity of the results to the decomposition order.
    Keywords: tax-benefit policy, inequality, poverty, decomposition, microsimulation
    JEL: H23 H53 I32
    Date: 2007–08–20
  3. By: Kai-Uwe Müller; Viktor Steiner
    Abstract: In view of rising wage inequality and increasing poverty, the introduction of a legal minimum wage has recently become an important policy issue in Germany. We analyze the distributional effects of the introduction of a nationwide legal minimum wage of ¿ 7.5 per hour on the basis of a microsimulation model which accounts for the complex interactions between individual wages, the tax-benefit system and net household incomes. Simulation results show that the minimum wage would be rather ineffective in reducing poverty, even if it led to a substantial increase in hourly wages at the bottom of the wage distribution and had no negative employment effects. The ineffectiveness of a minimum wage in Germany is mainly due to the existing system of meanstested income support.
    Keywords: minimum wage, wage distribution, working poor, poverty reduction, microsimulation
    JEL: I32 H31 J32
    Date: 2008
  4. By: Alari Paulus (Institute for Social and Economic Research); Andreas Peichl (University of Cologne)
    Abstract: The flat income tax has become increasingly popular recently, yet its implementation is limited to Eastern Europe. We analyse the distributional and efficiency effects of flat tax scenarios for Western European countries. Our simulations show that flat tax rates required to attain revenue neutrality with existing basic allowances improve labour supply incentives. However, they result in higher inequality and polarisation. Flat rates necessary to keep the inequality levels unchanged allow for some scope for flat taxes to increase both equity and efficiency. Our analysis suggests that Mediterranean countries are more likely to benefit from flat taxes.
    Keywords: flat tax, income inequality, microsimulation, tax reform
    Date: 2008–03

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