New Economics Papers
on Computational Economics
Issue of 2013‒01‒19
six papers chosen by

  1. Assessing changes of the Hungarian tax and transfer system: A general-equilibrium microsimulation approach By Péter Benczúr; Gábor Kátay; Áron Kiss
  2. Improving Work Incentives: Evaluation of Tax Policy Reform Using SRMOD By RanÄ‘elovicÌ, SasÌŒa; RakicÌ, Jelena ZÌŒarkovicÌ
  3. A NEW LP MODEL FOR ENHANCED INDEXATION By Renato Bruni; Francesco Cesarone; Andrea Scozzari; Fabio Tardella
  4. The fiscal and distributional impact of possible tax reforms in the Netherlands By Vos, Klaas de
  5. Economic well-being and distributional effects of housing-related policies in 3 European countries By Maestri, Virginia
  6. Non-linear dividend tax and dynamics of the firm By Seppo Kari; Jussi Laitila

  1. By: Péter Benczúr (Magyar Nemzeti Bank (central bank of Hungary)); Gábor Kátay (Magyar Nemzeti Bank (central bank of Hungary)); Áron Kiss (Magyar Nemzeti Bank (central bank of Hungary))
    Abstract: We present a new general-equilibrium behavioural microsimulation model designed to assess long-run macroeconomic and fiscal consequences of reforms to the tax and transfer system. General-equilibrium feedback effects are simulated by embedding microsimulation in a parsimonious macro model of a small open economy. We estimate and calibrate the model to Hungary, and then perform three sets of simulations. The first one explores the impact of personal income tax rate reductions which are identical in cost but different in structure. The second one compares three different tax shift scenarios, while the third one evaluates actual policy measures between 2008 and 2013. The results suggest that while a cut in the marginal tax rate of high-income individuals may boost output, it does not have a significant employment effect. On the other hand, programs like the Employee Tax Credit do have a significant employment effect. We find that policy measures since 2008 substantially increase income inequality in the long run; the contribution of the changes after 2010 are about three times that of the changes before 2010. Our results highlight that taking account of household heterogeneity is crucial in the analysis of the macroeconomic effects of tax and transfer reforms.
    Keywords: behavioural microsimulation, linked micro macro model, tax system, transfers
    JEL: H22 H31 C63
    Date: 2012
  2. By: RanÄ‘elovicÌ, SasÌŒa; RakicÌ, Jelena ZÌŒarkovicÌ
    Abstract: Inactivity and unemployment rates as well as informal employment rates in Serbia are particularly high among low-paid labor. Labour tax wedge is average at higher wage levels, but high at lower wage levels. The relatively high labour tax burden for low-paid employees is due to several reasons. The most important one is the existence of mandatory minimum base for social security contribution (SSC). This paper uses the tax and benefit micro-simulation model for Serbia (SRMOD), which is based upon EUROMOD platform, in order to evaluate the effects of the abolishment of mandatory minimum SSC base on labour supply incentives. We found that this policy reform would reduce effective average tax rates by more than it would reduce marginal tax rates implying a larger participation response than hours-of-work response. A decrease in both tax rates is most pronounced for lower income groups.
    Date: 2012–12–20
  3. By: Renato Bruni; Francesco Cesarone; Andrea Scozzari; Fabio Tardella
    Abstract: Enhanced Indexation is the problem of selecting a portfolio that should produce excess return with respect to a given benchmark index. In this work we propose a linear bi-objective optimization approach to Enhanced Indexation that maximizes average excess return and minimizes underperformance over a learning period. This can be formulated as a simple Linear Programming problem that is solved to optimality by standard LP codes. Moreover, we investigate conditions that guarantee or forbid the existence of a portfolio strictly outperforming the index. We present extensive computational analysis of the results on publicly available real-world nancial datasets, including comparison with previous results, performance and diversication analysis, and empirical verication of some of the proposed theoretical results.
    Keywords: Enhanced Indexation, Linear Programming, Performance Analysis, Portfolio Management, No Arbitrage condition.
    JEL: C61 D81 G11
    Date: 2012–11
  4. By: Vos, Klaas de
    Abstract: This paper uses the tax-benefit microsimulation model EUROMOD to assess how three types of tax reform would affect the state budget and the income distribution in the Netherlands. After briefly introducing the Dutch tax system and the case for and against these reforms, we investigate the effects of (1) introducing a flat income tax rate, (2) reducing the mortgage interest deduction and (3) shifting the state pension contribution to income tax, and of combining these reforms. Notably, the analysis does not include possible effects of these reforms on, e.g., the labour market and/or the housing market, but assesses the ceteris paribus effects of the reforms on the state budget and on poverty and inequality.Depending on the choice of the various parameters of the reforms both the budgetary and the distributional effects may vary widely. We show that the budget deficit may increase or decrease in combination with both increases and decreases in inequality and poverty. So, an optimal tax reform could be chosen depending on the preferences with respect to the budget and the income distribution.
    Date: 2012–12–18
  5. By: Maestri, Virginia
    Abstract: This paper evaluates the redistributive effect of a comprehensive set of housing-related policies, taking into account the housing advantage of homeowners and social tenants. We use the Euromod microsimulation model to simulate housing policies in Estonia, Italy and the United Kingdom. Disentangling the contribution to inequality and poverty of each housing-related policy, we find that the current design of property taxes is not progressive and that other housing policies have a limited impact on inequality in Estonia and on both inequality and relative poverty in Italy. In all three countries, housing-related policies favor the elderly.
    Date: 2012–12–19
  6. By: Seppo Kari; Jussi Laitila
    Abstract: This paper analyses the implications of a non-linear dividend tax in a life-cycle model of the firm. In the model new firms first enter markets, then grow, financing from retained earnings and finally distribute their profits in the steady state. We find that under a non-linear tax the owners prefer a smooth flow of dividends, which encourages the firms to start distributions right from the beginning. This slows down investments and leads to delayed growth of production. There is, however, an opposing effect resulting from an increase in the start-up size of the firm, which speeds growth. Simulations nevertheless show that a revenue-neutral switch from a linear to a progressive tax exacerbates production losses. We further find that this distortion can be substantially reduced by carrying forward unused tax allowances with interest.
    Keywords: dividend tax, progressive tax, nucleus theory, firm behavior
    JEL: H32 H24 G35
    Date: 2012–12–07

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.