The Behavioral Model for Estimating the Laffer Fiscal Points

Bulletin of the Georgian National Academy of Sciences, Vol. 7, No. 1, 2013

9 Pages Posted: 28 May 2013

See all articles by Iuri Ananiashvili

Iuri Ananiashvili

Ivane Javakhishvili Tbilisi State University - Department of Econometrics

Vladimer Papava

Ivane Javakhishvili Tbilisi State University

Date Written: May 27, 2013

Abstract

The article examines the approach to estimating the effect of the tax burden on the amount of total output and budget revenues. This approach uses a behavioral model, with a specific version of an entropy function. The suggested model makes it possible to determine the fiscal points corresponding to the maximum production effect and the budget’s maximum tax revenues. The conclusion is drawn that, these points correspond to the Laffer concept, since for the points of the behavioral model the amount of use of economic resources occurs endogenously. The results obtained are illustrated using existing data on the U.S. economy.

Keywords: average tax rate, production technology, production function, entropy function, Balatski fiscal points, Laffer fiscal points, optimal tax rate, potential level of output

JEL Classification: E19, E62, H21

Suggested Citation

Ananiashvili, Iuri and Papava, Vladimer, The Behavioral Model for Estimating the Laffer Fiscal Points (May 27, 2013). Bulletin of the Georgian National Academy of Sciences, Vol. 7, No. 1, 2013. Available at SSRN: https://ssrn.com/abstract=2270723 or http://dx.doi.org/10.2139/ssrn.2270723

Iuri Ananiashvili

Ivane Javakhishvili Tbilisi State University - Department of Econometrics ( email )

1, Chavchavdze Ave
Building I
Tbilisi, 0218
Georgia

Vladimer Papava (Contact Author)

Ivane Javakhishvili Tbilisi State University ( email )

1, Ilia Tchavtchavadze avenue
Tbilisi, Tbilisi 0179
Georgia
+995 32 222-0241 (Phone)
+995 32 222-5107 (Fax)

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