The non-optimality of the Mexican indirect tax system

Alberto Castañón-Herrera and Carlos Urzúa
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Alberto Castañón-Herrera: Benemérita Universidad Autónoma de Puebla

No 2011-02, EGAP Working Papers from Tecnológico de Monterrey, Campus Ciudad de México

Abstract: This paper starts with a review of the marginal tax reform methodology that was first advanced by Ahmad and Stern (1984), as well as its second-order variant introduced by Urzúa (2005). After that, it reviews some aspects of the estimation of demand systems, a topic that, although well known to applied econometricians, might be unfamiliar to practitioners. Finally, using an estimated demand system, the paper identifies marginal and second-order improvements in the current Mexican indirect tax system. For the non-experts, an appendix provides a computer code in Stata that can be used to estimate demand systems of the type considered here.

Keywords: Mexico; microsimulation models; marginal tax reform; Ahmad-Stern; social welfare; demand systems (search for similar items in EconPapers)
JEL-codes: C51 D12 H21 H22 I31 (search for similar items in EconPapers)
Date: 2011-07
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Chapter: The non-optimality of the Mexican indirect tax system (2012)
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