 Consumer Demand System Estimation and Value Added Tax Reforms in the Czech RepublicCzech Journal of Economics and Finance (Finance a uver), 2014, vol. 64, issue 3, 246-273 Abstract: The value added tax (VAT) rates have recently changed in the Czech Republic, and in this paper I simulate the impact of these reforms. They are an example of changes in indirect taxes that change the prices of goods and services, to which households can respond by adjusting their expenditures. I first estimate the behavioral response of consumers to price changes in the Czech Republic by applying a consumer demand model of the Quadratic Almost Ideal Demand System (QUAIDS) on the basis of the Czech Statistical Office household expenditure and price data for the period from 2001 to 2011. I derive estimates of own- and cross-price and income elasticities for individual households. I then use these elasticities to estimate the impact of the changes in VAT rates that were proposed or implemented between 2011 and 2013 on households’ quantity demanded and government revenues. One of the main findings is that the estimated increases in govern-ment revenues that take the consumer responses into account are more than a quarter lower than the estimates that use the static simulation. Keywords: consumer behavior; demand system; QUAIDS; tax reforms; value added tax (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:64:y:2014:i:3:p:246-273 Access Statistics for this article More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC. |
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