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Evaluating the Economic Effects of Flat Tax Reforms Using Synthetic Control Methods

Author

Listed:
  • Adhikari, Bibek
  • Alm, James
Abstract
Tax reforms are often motivated by their potential to improve economic performance. However,their actual impacts are difficult to quantify. We analyze the impact of flat tax reform on incomes using “synthetic control” methods. We identify the 8 Eastern and Central European countries that adopted flat tax systems between 1994 and 2005, and then compare post-reform GDP per capita of “treated” countries with a convex combination of similar but “untreated” countries, while accounting for the time-varying impact of unobservable heterogeneity. We find positive impacts in all 8 countries, with 7 out of 8 cases significant at the conventional level.

Suggested Citation

  • Adhikari, Bibek & Alm, James, 2017. "Evaluating the Economic Effects of Flat Tax Reforms Using Synthetic Control Methods," Working Paper Series 20294, Victoria University of Wellington, Chair in Public Finance.
    • Handle: RePEc:vuw:vuwcpf:20294
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    File URL: https://ir.wgtn.ac.nz/handle/123456789/20294
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    More about this item

    Keywords

    Flat tax; Tax reform; Synthetic control methods;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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