Claiming the usefulness of relative welfare indicators in general equilibrium analysis : a comprehensive comparison of VAT reforms
Guerra, Ana-Isabel
Universitat Autònoma de Barcelona. Unitat de Fonaments de l'Anàlisi Econòmic; Institut d'Anàlisi Econòmica

Imprint: Universitat Autònoma de Barcelona. Unitat de Fonaments de l'Anàlisi Econòmic; Institut d'Anàlisi Econòmica 2018
Description: 8 p.
Abstract: The evaluation of welfare effects should be clear and presented in an easy to interpret manner. In this paper, we show that on these grounds the true index of cost of living, first introduced by Konüs (1939), is preferable to the standard absolute indicators when evaluating welfare effects in static applied general equilibrium models i. e. the equivalent and the compensated variations. In these applied models, it is customary to use linearly homogeneous utility functions such as Cobb-Douglas or the more general CES specification. Under this class of utilities, the Konüs index is independent of the reference level of utility. This makes this index an unambiguous cost of living indicator. Lastly, to show the convenience of using the Konüs index in empirical work, we have carried out an original exercise with a novel data set for the Spanish economy. We report the macroeconomic and welfare impacts of two alternative Value-Added Tax Reforms through the application of an original simulation strategy.
Rights: L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons Creative Commons
Language: Anglès.
Series: Departament d'Economia i d'Història Econòmica: Unitat de Fonaments de l'Anàlisi Econòmica / Institut d'Anàlisi Econòmica (CSIC): Working papers
Series: Working papers ; 964.18
Document: workingPaper
Subject: Cost of living indices ; Applied general equilibrium analysis ; Tax reforms ; Fiscal policies

adreça alternativa: https://hdl.handle.net/2072/345561

The record appears in these collections:
Research literature > Working papers > Fundamentals Unit of the Economic Analysis. Working papers

 Record created 2019-01-22, last modified 2019-12-17



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