Impact of Tax Reforms in Applied Models: Which Functional Forms Should Be Chosen for the Demand System? Theory and Application for Morocco

When researchers and policymakers conduct impact analyses of economic reforms, especially fiscal the specification household demand system becomes crucial. There is a trade-off between using systems simple to manipulate but less realistic other systems that are more often complex difficult estimate or calibrate. In this paper, we compare results from two different systems: a one, Cobb- Douglas (CD), Constant Difference Elasticity (CDE). We develop an hybrid method estimation - calibration based on parameters and elasticities QUAIDS those CDE a cross-entropy approach. The estimates obtained introduced into micro-simulated partial equilibrium model approximate VAT reform poverty measures in Morocco. show when simulated shocks moderate, gain CDE system instead CD marginal but, these stronger, differences become significant increase. Then use models can lead when evaluating public policies their impacts measures.