Simulating the Effect of Business Tax Abolition through a New Regional CGE Model
The main goal of regional computable general equilibrium models is to analyze how different regions within a specific area react to certain shocks. Therefore, countries with high heterogeneity among regions, like Italy, constitute an interesting case study for regional computable general equilibrium model analysis. This paper presents the regional part of the new (recursive) dynamic single-country computable general equilibrium model called the Italian Regional and Environmental Computable General Equilibrium of the Department of Finance, based on the Mitigation, Adaptation and New Technologies Applied General Equilibrium model of the World Bank. A new regional social accounting matrix for Italy (20 regions at the Nomenclature of territorial units for statistics level) has been constructed. The social accounting matrix is used as input data to simulate the abolition of the regional tax on productive activities (regional business tax) through three different scenarios, focusing on the effects on gross domestic product, regional value added, and welfare. The results show that under the modeling assumptions, the complete abolition of the regional tax on productive activities would positively impact Italian economic growth and regional welfare.
| Main Authors: | , , , , , , |
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| Format: | Working Paper biblioteca |
| Language: | English English |
| Published: |
World Bank, Washington, DC
2023-04-05
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| Subjects: | CGE MODEL, BUSINESS TAX, FISCAL POLICY, APPLIED EQUALIBRIUM MODEL, REGIONAL GENERAL EQUILIBRIUM MODEL, REGIONAL SOCIAL ACCOUNTING MATRIX, |
| Online Access: | http://documents.worldbank.org/curated/en/099256203292313304/IDU0d4c5420a036e3048de0875f0c8c25d7dca6a https://openknowledge.worldbank.org/handle/10986/39638 |
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| Summary: | The main goal of regional computable general equilibrium
models is to analyze how different regions within a specific area react to certain shocks. Therefore, countries with
high heterogeneity among regions, like Italy, constitute an
interesting case study for regional computable general equilibrium model analysis. This paper presents the regional part
of the new (recursive) dynamic single-country computable
general equilibrium model called the Italian Regional and
Environmental Computable General Equilibrium of the
Department of Finance, based on the Mitigation, Adaptation and New Technologies Applied General Equilibrium
model of the World Bank. A new regional social accounting
matrix for Italy (20 regions at the Nomenclature of territorial units for statistics level) has been constructed. The social
accounting matrix is used as input data to simulate the abolition of the regional tax on productive activities (regional
business tax) through three different scenarios, focusing
on the effects on gross domestic product, regional value
added, and welfare. The results show that under the modeling assumptions, the complete abolition of the regional
tax on productive activities would positively impact Italian
economic growth and regional welfare. |
|---|