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The General Equilibrium Effects of Commodity Taxes in an Economy With Inter-Industry Flows

Author

Listed:
  • John M. Treddenick

    (Royal Military College of Canada)

  • Robin W. Boadway

    (Queen's University)

Abstract

A computational method is presented for obtaining a general equilibrium solution in a static neoclassical model of an economy which has intermediate products, exports and imparts, and tax distortions. Using an input-output table, the parameters of the various demand and supply functions in the economy can be chosen so that the general equilibrium solution exactly replicates the real world. The model is then applied to estimate the effects of commodity tax distortions in the Canadian economy using various assumptions about the form of production functions. The method is to replace the commodity tax distortions with lump-sum taxes, compute a new general equilibrium solution, and compare it with the original one to obtain changes in resource allocation, relative prices, the exchange rate, and economic welfare.

Suggested Citation

  • John M. Treddenick & Robin W. Boadway, 1977. "The General Equilibrium Effects of Commodity Taxes in an Economy With Inter-Industry Flows," Public Finance Review, , vol. 5(3), pages 303-328, July.
    • Handle: RePEc:sae:pubfin:v:5:y:1977:i:3:p:303-328
    DOI: 10.1177/109114217700500302
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    References listed on IDEAS

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    1. Herbert E. Scarf, 1969. "An Example of an Algorithm for Calculating General Equilibrium," Cowles Foundation Discussion Papers 276, Cowles Foundation for Research in Economics, Yale University.
    2. John B. Shoven & John Whalley, 1973. "General Equilibrium with Taxes: A Computational Procedure and an Existence Proof," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(4), pages 475-489.
    3. Scarf, Herbert, 1969. "An Example of an Algorithm for Calculating General Equilibrium Prices," American Economic Review, American Economic Association, vol. 59(4), pages 669-677, Part I Se.
    4. Harberger, Arnold C, 1971. "Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay," Journal of Economic Literature, American Economic Association, vol. 9(3), pages 785-797, September.
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