Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150729
Authors: 
Peichl, Andreas
Year of Publication: 
2009
Series/Report no.: 
SOEPpapers on Multidisciplinary Panel Data Research 182
Abstract: 
Microsimulation (MS) and Computable General Equilibrium models (CGE) have both been widely used in policy analysis. Their combination allows the utilisation of the advantages of both types. The aim of this paper is to describe the state-of-the-art in simulation analysis and to illustrate the benefits and problems of linking micro and macro models by analysing flat tax reform proposals for Germany. Taking feedback effects into account has important implications for the evaluation of tax reforms. The analysis shows that a personal income flat tax can indeed overcome the fundamental equity efficiency trade-off while simultaneously increasing the tax revenue. However, this result does not hold for a flat tax combining a personal income flat tax with a corporate cash flow flat tax, even when allowing for an ex-post loss in revenue as the top of the distribution still gains the most.
Subjects: 
Microsimulation
CGE
linked micro macro models
flat tax
JEL: 
D58
H2
J22
Document Type: 
Working Paper

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