Integrating Microsimulation Models of Tax Policy into a DGE Macroeconomic Model

Jason DeBacker (), Richard Evans and Kerk L. Phillips

Public Finance Review, 2019, vol. 47, issue 2, 207-275

Abstract: This article proposes a method for integrating individual effective tax rates and marginal tax rates computed from a microsimulation (partial equilibrium) model of tax policy with a dynamic general equilibrium model of tax policy that can provide macroeconomic analysis or dynamic scores of tax reforms. Our approach captures the rich heterogeneity, realistic demographics, and tax-code detail of the microsimulation model and allows this detail to inform a general equilibrium model with a relatively high degree of heterogeneity. In addition, we propose a functional form in which tax rates depend jointly on the levels of both capital income and labor income.

Keywords: microsimulation; effective tax rates; marginal tax rates; dynamic general equilibrium; dynamic scoring; static scoring (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:47:y:2019:i:2:p:207-275

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