Tax Reform Results with Different Demand Systems
We calculate the marginal welfare costs for a twelve-commodity classification of the Belgian indirect tax system. Price elasticities are estimated with Rotterdam, AIDS, CBS and the linear expenditure system. The ranking of the marginal welfare costs is similar when we use unrestricted estimates of the first three systems. After the symmetry conditions of the Slutsky matrix is imposed, the differences become more important. However, they diminish with increasing inequality aversion.