Simulating Corporate Income Tax Reform Proposals with a Dynamic CGE Model

Keshab Bhattarai, Jonathan Haughton, Michael Head, David G Tuerck


Opinion leaders and policy makers in the United States have turned their focus to the corporate income tax, which now has the highest statutory rate in the developed world. Using a dynamic computable general equilibrium model (the “NCPA-DCGE Model”), we simulate alternative policies for reducing the U.S. corporate income tax.  We find that reductions in the corporate income tax rate result in significant positive impacts on output, investment, capital formation, employment, and household well-being (for almost all deciles). All of the hypothesized reforms also result in a more-streamlined public sector. These results are plausible insofar as the DCGE model from which they are obtained is parameterized by plausible elasticity assumptions, and incorporates the adjustments in prices, output, employment and investment that result from changes in tax policy.

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Copyright (c) 2017 Keshab Bhattarai, Jonathan Haughton, Michael Head, David G Tuerck

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)  Email:

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