Trine E. Vattø - Predicting behavioral effects of tax policy by external evidence

  • Presenting author: Trine E. Vattø (Statistics Norway)

  • Authors: Zhiyang Jia, Thor O. Thoresen, Trine E. Vattø

  • Session: B03A - Behavior [1] - Tuesday 14:00-15:30 - Ceremonial Hall

  • Slides: PDF

In the process of designing tax-transfer schedules, the decision-makers are informed about effects of prospective tax policies by the use of microsimulation models. Behavioral simulation modules can be used to supplement results from non-behavioral tax-benefit models. However, the policy analyst may not always have access to a fully developed behavioral simulation model for the policy issue in question. Here we draw attention to an alternative, which implies describing behavioral effects by using response estimates from other studies, referred to as ”external evidence”. We show how tax revenues and distributional effects can be evaluated by feeding external response estimates into a non-behavioral tax-benefit model. A change in Norwegian tax policy at high income levels is used to illustrate the framework.