Summary and Conclusions

Abstract

In the preceeding chapters we used a computable general equilibrium model to evaluate the welfare effects of different VAT reform proposals. When we started our project we were convinced that CGE modelling would be the most appropriate approach for an investigation of the welfare effects of tax reforms in a multi-commodity, multi-country framework. After having finished our work we still believe in the virtues of CGE analysis, but also regard rough-and-ready first round calculations much more favorably than before. The reason is not so much that CGE models have a number of serious drawbacks; these were known to us beforehand. The more disturbing fact is that in most cases first round calculations proved to be reasonable approximations for general equilibrium quantifications.