The welfare effect of flat income tax reform: the case of Bulgaria

Aleksandar Vasilev

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: This paper is a first attempt to provide a quantitative evaluation of the welfare gains resulting from the introduction of flat income taxation in Bulgaria in 2008. Using a calibrated micro-founded endogenous growth model with physical and human capital accumulation to Bulgarian data, a computational experiment is performed to quantify the dynamic welfare effect of progressive income taxation vis-a-vis flat income taxation. The model demonstrates that significant welfare gains, measured in terms of per-period consumption, can be realized with the introduction of flat income taxation. In addition, these welfare gains increase proportionally with the length of the time horizon considered. Finally, sensitivity analysis was performed to demonstrate that the results obtained are robust.

Keywords: taxation; endogenous growth; human capital; welfare gains (search for similar items in EconPapers)
JEL-codes: D91 O41 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cse, nep-dge and nep-pbe
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Citations: View citations in EconPapers (17)

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Journal Article: The welfare effect of flat income tax reform: the case of Bulgaria (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:144527

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