Efficiency and Equity of a Marginal Tax Reform - Income, Quality, and Price Elasticities for Mexico
The author investigates the effects of a marginal tax reform on household welfare in Mexico. He estimates the extent to which Mexican households react to changes in prices, and uses the estimates to simulate changes in social welfare resulting from...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, D.C.
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2004/04/3217441/efficiency-equity-marginal-tax-reform-income-quality-price-elasticities-mexico http://hdl.handle.net/10986/14790 |
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okr-10986-147902021-04-23T14:03:20Z Efficiency and Equity of a Marginal Tax Reform - Income, Quality, and Price Elasticities for Mexico Nicita, Alessandro TAX REFORMS MARGINAL TAX RATES PRICE ELASTICITY INCOME ELASTICITY QUALITY STANDARDS HOUSEHOLD DATA SOCIAL WELFARE ECONOMIC POLICY POVERTY INCIDENCE HOUSEHOLD CONSUMPTION POVERTY REDUCTION ABSOLUTE VALUE BUDGET CONSTRAINTS CAPITA EXPENDITURE CONSUMERS CONSUMPTION PATTERNS DEGREE OF INEQUALITY DEGREES OF FREEDOM DEMAND ANALYSIS DEVELOPING COUNTRIES DEVELOPMENT RESEARCH GROUP DIFFERENCES IN INCOME ECONOMETRICS ECONOMIC POLICIES ECONOMIC REFORMS ECONOMIC REVIEW ELASTICITY EQUATIONS ESTIMATION PROCEDURE EXPENDITURES FIRST-STAGE ESTIMATION FIRST-STAGE PARAMETERS GEOGRAPHIC LOCATION HIGH INEQUALITY HOUSEHOLD CONSUMPTION HOUSEHOLD INCOME HOUSEHOLD MEMBERS HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEY DATA HOUSEHOLD SURVEYS HOUSEHOLDS INCOME INCOME ELASTICITY INCOME LEVEL INCOME QUINTILES INCREASING INEQUALITY INEQUALITY AVERSION INEQUALITY AVERSION PARAMETER MARGINAL UTILITY MARKET PRICES MEASUREMENT ERROR MEASUREMENT ERRORS OIL PARAMETER ESTIMATES POLICY RESEARCH POOR HOUSEHOLDS POVERTY LINE PRICE ELASTICITIES PRICE ELASTICITY PRICE VARIATIONS PURCHASING PURCHASING POWER REGIONAL DIFFERENCES SERIES DATA SKILLED WORKERS STANDARD ERROR STANDARD ERRORS SUBSTITUTES TAX RATES TAX REFORM TAX REFORMS TAXATION TIME SERIES TRADE LIBERALIZATION WELFARE EFFECTS WELFARE FUNCTION WELFARE GAINS The author investigates the effects of a marginal tax reform on household welfare in Mexico. He estimates the extent to which Mexican households react to changes in prices, and uses the estimates to simulate changes in social welfare resulting from marginal tax reform. Results indicate that poorer households tend to have significantly larger income and price elasticities. Hence, to correctly evaluate the effects of economic policies on the poor, it is important to estimate elasticities that reflect the behavioral responses of the poor rather than of the entire population. The results from the micro simulation suggest that since poorer households rely mostly on maize, legumes, and vegetables to fulfill their caloric intake, any price reform that reduces the price of these products will have a larger effect on the welfare of poor households. In particular, reducing the taxes on maize, alcoholic beverages, and vegetables would be both more equitable and more efficient in terms of social welfare. Meanwhile, a reduction in the tax on legumes, sugar, and oils and fats, while inefficient, would contribute to reduce inequality. Finally, a decrease in the price of meat, wheat, and dairy products, while benefiting higher-income households, would have only a marginal impact on poorer households. 2013-08-05T13:47:57Z 2013-08-05T13:47:57Z 2004-04 http://documents.worldbank.org/curated/en/2004/04/3217441/efficiency-equity-marginal-tax-reform-income-quality-price-elasticities-mexico http://hdl.handle.net/10986/14790 English en_US Policy Research Working Paper;No.3266 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, D.C. Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean Mexico |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
TAX REFORMS MARGINAL TAX RATES PRICE ELASTICITY INCOME ELASTICITY QUALITY STANDARDS HOUSEHOLD DATA SOCIAL WELFARE ECONOMIC POLICY POVERTY INCIDENCE HOUSEHOLD CONSUMPTION POVERTY REDUCTION ABSOLUTE VALUE BUDGET CONSTRAINTS CAPITA EXPENDITURE CONSUMERS CONSUMPTION PATTERNS DEGREE OF INEQUALITY DEGREES OF FREEDOM DEMAND ANALYSIS DEVELOPING COUNTRIES DEVELOPMENT RESEARCH GROUP DIFFERENCES IN INCOME ECONOMETRICS ECONOMIC POLICIES ECONOMIC REFORMS ECONOMIC REVIEW ELASTICITY EQUATIONS ESTIMATION PROCEDURE EXPENDITURES FIRST-STAGE ESTIMATION FIRST-STAGE PARAMETERS GEOGRAPHIC LOCATION HIGH INEQUALITY HOUSEHOLD CONSUMPTION HOUSEHOLD INCOME HOUSEHOLD MEMBERS HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEY DATA HOUSEHOLD SURVEYS HOUSEHOLDS INCOME INCOME ELASTICITY INCOME LEVEL INCOME QUINTILES INCREASING INEQUALITY INEQUALITY AVERSION INEQUALITY AVERSION PARAMETER MARGINAL UTILITY MARKET PRICES MEASUREMENT ERROR MEASUREMENT ERRORS OIL PARAMETER ESTIMATES POLICY RESEARCH POOR HOUSEHOLDS POVERTY LINE PRICE ELASTICITIES PRICE ELASTICITY PRICE VARIATIONS PURCHASING PURCHASING POWER REGIONAL DIFFERENCES SERIES DATA SKILLED WORKERS STANDARD ERROR STANDARD ERRORS SUBSTITUTES TAX RATES TAX REFORM TAX REFORMS TAXATION TIME SERIES TRADE LIBERALIZATION WELFARE EFFECTS WELFARE FUNCTION WELFARE GAINS |
| spellingShingle |
TAX REFORMS MARGINAL TAX RATES PRICE ELASTICITY INCOME ELASTICITY QUALITY STANDARDS HOUSEHOLD DATA SOCIAL WELFARE ECONOMIC POLICY POVERTY INCIDENCE HOUSEHOLD CONSUMPTION POVERTY REDUCTION ABSOLUTE VALUE BUDGET CONSTRAINTS CAPITA EXPENDITURE CONSUMERS CONSUMPTION PATTERNS DEGREE OF INEQUALITY DEGREES OF FREEDOM DEMAND ANALYSIS DEVELOPING COUNTRIES DEVELOPMENT RESEARCH GROUP DIFFERENCES IN INCOME ECONOMETRICS ECONOMIC POLICIES ECONOMIC REFORMS ECONOMIC REVIEW ELASTICITY EQUATIONS ESTIMATION PROCEDURE EXPENDITURES FIRST-STAGE ESTIMATION FIRST-STAGE PARAMETERS GEOGRAPHIC LOCATION HIGH INEQUALITY HOUSEHOLD CONSUMPTION HOUSEHOLD INCOME HOUSEHOLD MEMBERS HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEY DATA HOUSEHOLD SURVEYS HOUSEHOLDS INCOME INCOME ELASTICITY INCOME LEVEL INCOME QUINTILES INCREASING INEQUALITY INEQUALITY AVERSION INEQUALITY AVERSION PARAMETER MARGINAL UTILITY MARKET PRICES MEASUREMENT ERROR MEASUREMENT ERRORS OIL PARAMETER ESTIMATES POLICY RESEARCH POOR HOUSEHOLDS POVERTY LINE PRICE ELASTICITIES PRICE ELASTICITY PRICE VARIATIONS PURCHASING PURCHASING POWER REGIONAL DIFFERENCES SERIES DATA SKILLED WORKERS STANDARD ERROR STANDARD ERRORS SUBSTITUTES TAX RATES TAX REFORM TAX REFORMS TAXATION TIME SERIES TRADE LIBERALIZATION WELFARE EFFECTS WELFARE FUNCTION WELFARE GAINS Nicita, Alessandro Efficiency and Equity of a Marginal Tax Reform - Income, Quality, and Price Elasticities for Mexico |
| geographic_facet |
Latin America & Caribbean Mexico |
| relation |
Policy Research Working Paper;No.3266 |
| description |
The author investigates the effects of a
marginal tax reform on household welfare in Mexico. He
estimates the extent to which Mexican households react to
changes in prices, and uses the estimates to simulate
changes in social welfare resulting from marginal tax
reform. Results indicate that poorer households tend to have
significantly larger income and price elasticities. Hence,
to correctly evaluate the effects of economic policies on
the poor, it is important to estimate elasticities that
reflect the behavioral responses of the poor rather than of
the entire population. The results from the micro simulation
suggest that since poorer households rely mostly on maize,
legumes, and vegetables to fulfill their caloric intake, any
price reform that reduces the price of these products will
have a larger effect on the welfare of poor households. In
particular, reducing the taxes on maize, alcoholic
beverages, and vegetables would be both more equitable and
more efficient in terms of social welfare. Meanwhile, a
reduction in the tax on legumes, sugar, and oils and fats,
while inefficient, would contribute to reduce inequality.
Finally, a decrease in the price of meat, wheat, and dairy
products, while benefiting higher-income households, would
have only a marginal impact on poorer households. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Nicita, Alessandro |
| author_facet |
Nicita, Alessandro |
| author_sort |
Nicita, Alessandro |
| title |
Efficiency and Equity of a Marginal Tax Reform - Income, Quality, and Price Elasticities for Mexico |
| title_short |
Efficiency and Equity of a Marginal Tax Reform - Income, Quality, and Price Elasticities for Mexico |
| title_full |
Efficiency and Equity of a Marginal Tax Reform - Income, Quality, and Price Elasticities for Mexico |
| title_fullStr |
Efficiency and Equity of a Marginal Tax Reform - Income, Quality, and Price Elasticities for Mexico |
| title_full_unstemmed |
Efficiency and Equity of a Marginal Tax Reform - Income, Quality, and Price Elasticities for Mexico |
| title_sort |
efficiency and equity of a marginal tax reform - income, quality, and price elasticities for mexico |
| publisher |
World Bank, Washington, D.C. |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2004/04/3217441/efficiency-equity-marginal-tax-reform-income-quality-price-elasticities-mexico http://hdl.handle.net/10986/14790 |
| _version_ |
1764430089691332608 |