Library Dissertation Showcase

The Quantitative Effect of the Thatcherism Taxation Programme: Computational Experiments based on a Dynamic General Equilibrium Model

  • Year of Publication:
  • 2021

This paper analyses the quantitative welfare effects of the ‘Thatcherism’ taxation programme reforms. Modern macroeconomic techniques are put into application to the important historical fiscal reforms. The paper provides details of the Thatcherism taxation reform, the changes in tax rates and brackets. The paper presents a dynamic general equilibrium model, and through it, the paper provides counter-factual growth rates. The paper finds significant welfare increases due to the reforms of the Thatcher government. The Paper analyses all of the Thatcherism taxation program reforms compared to counter-factual growth rates with no capital gains tax reform and no income tax reforms. Find a 173.89% increase compared to no capital gains reform and a 173.55% increase compared to no income taxation reform. The paper then analyses the individual reform on the average income tax rate, finding a 2.6% increased welfare benefit, and then the average income tax rate including the change in progressivity schedule, finding a 3.00% increased benefit. This paper provides evidence for the effects of the supply-side fiscal policy, it presents the effect on welfare and discusses the effects on capital accumulation, distribution of wealth and the supply of labour.

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