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The marginal costs of funds in the VATTAGE model of Finland: a back of the envelope justification of the welfare effects of additional government revenue

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  • Dixon, Peter B.
  • Honkatukia, Juha
  • Rimmer, Maureen T.

Abstract

This paper is part of a larger study on public finance aspects of population ageing in Finland. We are using the VATTAGE model to calculate the welfare effects of various tax increases designed to improve the budgetary position of the Finnish government, that is we are calculating the marginal cost of funds (MCF) raised by different taxes. VATTAGE has been extended to include leisure and savings choice in the specification of household behaviour. This extension is necessary for useful MCF calculations. The main contribution of this paper is the development of a back-of-the-envelope (BOTE) equation to guide the explanation of MCF results generated from a full-scale, dynamic CGE model.

Suggested Citation

  • Dixon, Peter B. & Honkatukia, Juha & Rimmer, Maureen T., 2011. "The marginal costs of funds in the VATTAGE model of Finland: a back of the envelope justification of the welfare effects of additional government revenue," Conference papers 332135, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332135
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    References listed on IDEAS

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