OECDTax
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OECDTAX is an applied general equilibrium model. It describes the international spillover effects of national tax policies via the world capital market and may be used to illustrate the effects of various forms of international tax co-ordination or tax competition. It also shows the effects of tax policies on the labour market in an integrated world economy with structural unemployment.
The model is static, describing a stationary long-run equilibrium. The world economy is divided into two main regions called the European Union (EU) and the Rest of the World (ROW). Both of the two regions consist of several countries.
In each national economy firms combine internationally mobile capital with immobile labour to produce a homogeneous internationally traded good. Each country is inhabited by a large number of identical households endowed with a predetermined stock of wealth. A consumer may consume his wealth immediately, or he may accumulate various assets earning a positive rate of return.
The business sector is divided into a sector of domestic firms with no international operations and a sector of multinational parent companies owning foreign subsidiaries in each of the other countries in the world economy. The product market is competitive but the labour market is characterised by imperfect competition.[1]
Result
Typical Model Applications:
- Simulation of spillover effects of national tax policies.
- Simulation of tax policy - labour market interaction.
- Analysis of tax competition.
Sectoral coverage:
- Production sectors: Multinational companies and domestic companies.
- Investor categories: Household investors, banks and institutional investors[1]
Consumption categories:
- Housing services and other consumption goods
Behavioural assumptions:
- Households: Households maximize utility
- Firms: Firms maximize profits
Government behaviour:
The government in each country balances its budget
Dynamic structure:
- The OECDTAX model is static, describing a long-rum equilibrium. Variations in endogenous variables may be interpreted as level changes in a time path of exogenous steady state growth.
Market Structure:
Product market: The product market is perfectly competitive
Labour market: The labour market is imperfectly competitive (involuntary structural unemployment)[1]
Main Model Results:
The model calculates the effects of changes in tax policies on the levels of GDP, employment and unemployment, and on the national and international allocation of capital (measured by the size of the capital stock in the various sectors and countries). Effects on consumer welfare are also calculated.
Required technical infrastructure:
The model is programmed in the GAMS mathematical modelling language.
Structure of Input Data:
Exogenous variables and parameters:
- The calibration of the model requires the use of data from the OECD national income accounts, statistics on stocks of foreign direct investment plus estimates of statutory and effective tax rates on various forms of capital income. Data on the extent of international exchange of information among tax authorities are also used to calibrate the fraction of foreign source portfolio income which escapes domestic taxation.
Model Extensions:
--
Links to other Models, Projects, Networks:
EUTAX, TAXCOM
Regional Scope:
OECD countries. [1]
See also
- IA TOOLS
- More information
- OECDTAX - A Model of Tax Policy in the OECD Economy
- EUTAX - A Model of Tax Policy, Unemployment and Capital Flows
- AXCOM - A Model of International Tax Competition and Tax Coordination
References
Sorensen, Peter B., "OECDTAX - A Model of Tax Policy in the OECD Economy". Technical Working Paper, Economic Policy Research Unit, University of Copenhagen, November 2001.
Sorensen, Peter B., "EUTAX - A Model of Tax Policy, Unemployment and Capital Flows". Technical Working Paper, Economic Policy Research Unit, University of Copenhagen, May 2001.
Sorensen, Peter B., "TAXCOM - A Model of International Tax Competition and Tax Coordination", Working Paper, Economic Policy Research Unit, October 2000. (Background documentation of paper in Economic Policy on "The Case for International Tax Coordination Reconsidered").