Portuguese Economic Journal, 2002, Volume 1, Nº 3
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- On the impact of a tax shock in PortugalPublication . Pereira, Alfredo M.; Rodrigues, Pedro G.In 1999, Cavaco Silva, the Portuguese Prime Minister from 1985 to 1995, proposed a comprehensive tax reform package, which is to this day the basic reference in the tax policy debate in Portugal. A tax shock would consist of 4pp cuts in the corporate income tax and in the firms’ social security contribution rates, and a 5pp reduction in the highest personal income tax rate. These cuts would be financed by combating tax evasion, curbing wasteful public expenditure and, if necessary, by increasing the VAT rate by up to 2pp. Using a dynamic general equilibrium model to evaluate the effects of this tax shock, we find that the long- term GDP gains would be between 0.72% and 2.91% while the effects on lifetime private welfare would range between –0.99% and 0.9%. The efficiency of this tax reform package depends critically on the way the tax cuts are financed to ensure deficit neutrality. Because investment is subject to adjustment costs, to alleviate the long-run trade-off between GDP and welfare, tax policy changes must induce a significant increase in net labor income.
- Bargaining regimes and wages in PortugalPublication . Hartog, Joop; Pereira, Pedro T.; Vieira, José A.C.In this paper we analyse the bargaining regime wage-effect in Portugal. The results indicate that the bargaining regime coverage is important in explain- ing the variability of wages. Wage differentials between bargaining regimes are substantial, a fact which may be related to a decentralised wage setting which pre- vails in Portugal. The highest wages are generated by multi-firm negotiations and the lowest are generated by sectoral contracts. Single-firm contracts align at an intermediate level in the ranking.