04 March 2010
Juan Carlos Conesa (MOVE and Universitat Autònoma de Barcelona), Javier Díaz-Giménez (IESE Business School), Julián Díaz-Saavedra (Universidad de Granada) and Josep Pijoan-Mas (CEMFI and CEPR) presented an article studying the consequences in Spain of the value added tax raise scheduled next July.
Juan Carlos and his colleagues have quantified the consequences of such policy using and comparing two models: a representative agent neoclassical growth model and an heterogeneous agent incomplete markets model. According to their results, the VAT raise may hamper the economic activity due to a decrease in labor and production. It may be regressive, as it would particularly damage the younger, older and poorer households. The measure could also come too early in the cycle because there are no clear signals of recovery yet.
The article has had relative impact within the Spanish general and business press, for instance in ABC (4th of March), Cinco Días (2nd of March) or Cotizalia (1st of March).
Professor Conesa has also published an entry with the article conclusions the in the FEDEA blog NadaEsGratis (in Spanish).
