Faculty of Economic and Management Sciences
School of Economic Sciences
Department of Economics
Selected Highlights from Research Findings
The Bureau for Economic Policy and Analysis (BEPA) has been contracted by the National Treasury and South African Revenue Service (SARS) to construct a micro-simulation tax model, with a view to establish a database of taxpayers, their taxable income and tax obligations based on the appropriate tax codes. The model should determine the tax gap for personal and corporate taxpayers, assist with forecasting revenue, and provide training to SARS officials.
BEPA has also developed a behavioural micro-simulation model to examine the impact of the tax structure on individual-level consumption. This model broadens the scope of tax policy analysis in South Africa by estimating the magnitude of secondary effects from changes in the tax structure. The model has proved to be extremely useful in the estimation of future tax revenue with regard to different income groups, regions, sources, etc. This makes it a useful tool in tax policy simulation (e.g. distributional, regional and fiscal effects). Besides the forecasting of revenue, the model will show the effects of policy changes on specific categories of taxpayers (personal and corporate). It is also useful for assessing the efficiency of policy proposals in achieving tax policy objectives.
Contact person: Prof NJ Schoeman.
A series of bi-annual economic analyses and forecasting reports, Economic Outlook and Policy Perspective, was launched in 2004. The main objective of these reports is to present an assessment and forecast of the South African economy based on the outcomes of macro-econometric and computable general equilibrium (CGE) models. In addition, each report focuses on a particular issue pertinent to the South African economy, together with an associated critical policy challenge. The October 2004 edition, for example, focused on the value, impact and policy implications of the exchange rate, as well as the policy challenges regarding the potential capacity of the South African economy.
Contact person: Dr MR Chitiga.
AFRINEM provides in the need for capacity building in sound economic modelling to facilitate responsible and effective economic policy in Africa, by creating a lasting culture of interaction and cooperation between modellers and policy makers. To continuously expand this network, it enters into operating agreements and memoranda of understanding with central banks, international institutions, and government and other research agencies. It supports the African Union and NEPAD by facilitating sound fundamentals for sustainable growth and development.
Contact person: Prof CB du Toit.
Traditional trade theory and data do not capture the essence of trade between countries and sectors on a bilateral level. The gravity model does that: it uses the concept of gravity between two objects to determine the forces or factors of attraction or repulsion. When the flows concern international trade, the objects are the exporting and importing countries. The 'masses' of the countries are the sizes of their economies as determined by their population and GDP, from which a certain potential trade flow results: the larger the economies, the larger the trade. The distance between countries causes a resistance to trade because of transport costs and time, but other factors, like import tariffs, border control and quantity restrictions — although not related to distance — further hamper trade. The exchange rate and effective rate of protection between countries will also attribute to gravity forces. All these determinants are included in the gravity equation between South Africa and its 50 largest export partners, developed by the University's Investment and Trade Policy Centre for the Department of Trade and Industry (DTI). Potential trade between South Africa and these countries are simulated and compared to actual bilateral trade. Determining the trade potential is important for the DTI, not only for total exports, but also for different sectors. A gravity equation, explaining bilateral exports within the sample, is estimated. This equation is used in simulation to determine natural bilateral trade between South Africa and each of the 50 other countries. The gravity model as a working tool can be used by the DTI for research and policy formulating, will assist government in both its bilateral trade negotiations and identify areas of possible government intervention. The ability of the model to determine the revealed comparative advantage coefficient, intra-industry trade level and potential and actual levels of trade for each sector of the economy forms the heart of the research. The data and results will be updated annually, and the model will be further refined. As agreed, short courses are provided to the DTI to demonstrate and teach the use of the model. Further development will include all other countries (more than 150) and a simulation of the effect on South Africa's potential level of exports to each translated into policy.
Contact person: Prof C Harmse.
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