Welfare gains from the adoption of proportional taxation in a general-equilibrium model with a grey economy: the case of Bulgaria’s 2008 flat tax reform

Vasilev, Aleksandar

doi:10.1007/s10644-015-9159-5

Cited by 15 publications

(8 citation statements)

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“…Next, steady state employment rate in Bulgaria is set to n = 0.533, as in Vasilev (2016a). Following Vasilev (2015b), h = 1/3. The values for ϕ 1 , ϕ 2 , ϕ 3 were taken as the point estimates from running a simple multivariate regression on the specification in Eq.…”

Section: Data and Model Calibrationmentioning

confidence: 99%

Optimal fiscal policy in a model with reciprocity in labor relations: the case of Bulgaria

Vasilev

2022

JEAS

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PurposeThis paper explores the effects of fiscal policy in an economy with reciprocity in labor relations and fair wages, consumption taxes and a common income tax rate in place.Design/methodology/approachTo this end, a dynamic general-equilibrium model with government sector is calibrated to Bulgarian data (1999–2018). Two regimes are compared and contrasted – the exogenous (observed) vs optimal policy (Ramsey) case. The focus of the paper is on the relative importance of consumption vs income taxation, as well as on the provision of utility-enhancing public services. Bulgarian economy was chosen as a case study due to its major dependence on consumption taxation as a source of tax revenue.Findings(1) The optimal steady-state income tax rate is zero; (2) the benevolent Ramsey planner provides the optimal amount of the utility-enhancing public services, which are now three times lower; (3) the optimal steady-state consumption tax needed to finance the optimal level of government spending is 18:7%.Originality/valueThis is the first study on optimal fiscal policy with reciprocity in labor relations.

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Section: Data and Model Calibrationmentioning

confidence: 99%

Optimal fiscal policy in a model with reciprocity in labor relations: the case of Bulgaria

Vasilev

2022

JEAS

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“…The relative weight attached to the utility out of leisure in the household's utility function, η, and the shirking detection probability d, can only be determined as a ratio, which would be calibrated to match χ. Following Vasilev (2015b), the hours worked per person h is set to one-third. Once the values of model parameters were obtained, the steady-state equilibrium system solved, the "big ratios" can be compared to their averages in Bulgarian data.…”

Section: Data and Model Calibrationmentioning

confidence: 99%

Optimal fiscal policy in a model with efficiency wages: the case of Bulgaria

Vasilev

2022

IJSE

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PurposeThis paper aims to explore the effects of fiscal policy in an economy with efficiency wages, consumption taxes and a common income tax rate.Design/methodology/approachA dynamic general-equilibrium model with the government sector is calibrated to Bulgarian data (1999–2018). Two regimes are compared and contrasted – the exogenous (observed) vs optimal policy (Ramsey) case.FindingsThe main findings are as follows: (1) The optimal steady-state income tax rate is zero. (2) The benevolent Ramsey planner provides three times lower amount of the utility-enhancing public services. (3) The optimal steady-state consumption tax needed to finance the optimal level of government spending is 18.7%.Originality/valueThe focus of the paper is on the relative importance of consumption vs income taxation, as well as on the provision of utility-enhancing public services. Bulgarian economy was chosen as a case study due to its major dependence on consumption taxation as a source of tax revenue.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-08-2021-0488.

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“…Quarterly data on output, consumption and investment was collected from National Statistical Institute (2021), while the real interest rate is taken from Bulgarian National Bank Statistical Database (2021). The calibration strategy described in this section follows a long-established tradition in modern macroeconomics: first, as in Vasilev (2015b), the discount factor, β = 0.982, is set to match the steady-state capital-to-output ratio in Bulgaria, k/y = 13.964, in the steady-state Euler equation. The labor share parameter, 1 − α = 0.571, is obtained as in Vasilev (2015a), and equals the average value of labor income in aggregate output over the period 1999-2020.…”

Section: Data and Model Calibrationmentioning

confidence: 99%

“…Next, the relative weight attached to the utility out of leisure in the household's utility function, γ, is calibrated to match that in steady-state consumers would supply one-third of their time endowment to working. Next, the steady-state depreciation rate of physical capital in Bulgaria, δ = 0.013, was taken from Vasilev (2015b). It was estimated as the average quarterly depreciation rate over the period 1999-2020.…”

Section: Data and Model Calibrationmentioning

confidence: 99%

A Real-Business-Cycle Model with Financial Liberalization: Lessons for Bulgaria (1999-2020)

Vasilev¹

2022

J. of. Math. Econ. and Finan.

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Financial openness is introduced into a real-business-cycle setup aug- mented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999- 2020). The quantitative importance of financial openness is investigated for the stabi- lization of cyclical fluctuations in Bulgaria. The computational experiment performed in this paper reveals that greater financial openness increases the impact of technology shocks on output, investment, consumption, labor hours, and net exports. This am- plification effect is due to the following mechanism: openness provides a cheap access to foreign funds. Unfortunately, the new results come at odds with a major empirical observation, i.e. that consumption and net exports strongly pro-cyclical; the model, however, produces a countercyclical consumption, as well as net exports. Thus, such a setup is not yet ready to be used for policy analysis.

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Welfare gains from the adoption of proportional taxation in a general-equilibrium model with a grey economy: the case of Bulgaria’s 2008 flat tax reform

Cited by 15 publications

References 15 publications

Optimal fiscal policy in a model with reciprocity in labor relations: the case of Bulgaria

Optimal fiscal policy in a model with reciprocity in labor relations: the case of Bulgaria

Optimal fiscal policy in a model with efficiency wages: the case of Bulgaria

A Real-Business-Cycle Model with Financial Liberalization: Lessons for Bulgaria (1999-2020)

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