Redistributive effects of indirect taxes: comparing arithmetic and behavioral simulations in Uruguay

We compare the redistributive effect of a VAT reform using an arithmetical and a behavioral microsimulation model. We analyze the effects of the elimination of the VAT for a basket of goods which is intensively consumed by the poorest population. Our behavioral model is based on data from the expenditure survey. Using the Quadratic Almost Ideal Demand System (QUAIDS) proposed by Banks et al (1997). The comparison of redistributive effects under the arithmetic and the behavioral simulation indicates that the change in the VAT implies a redistributive effect of small magnitude. Most importantly, results from the arithmetic and behavioral models are almost the same.