Public Finance in a Nutshell: A Cobb Douglas Teaching Tool for General Equilibrium Tax Incidence and Excess Burden

Don Fullerton () and Chi Ta

National Tax Journal, 2017, vol. 70, issue 1, 155-170

Abstract: To help first- or second-year graduate students in economics apply their theoretical training, this paper shows how to solve a simple and intuitive computable general equilibrium (CGE) model using a calculator. Because this simplified Harberger model uses Cobb Douglas functional forms for utility and production, one can solve for all input and output prices and quantities with no taxes and then solve for exact measures of output with a large tax change (not using derivatives). We then show how to solve simultaneously for capital and labor prices (incidence on the sources side of income), for both output prices (incidence on the uses side), for exact measures of overall welfare loss such as the equivalent variation, for excess burden and marginal excess burden, and for the effects on revenue in the form of a Laffer Curve.

Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.17310/ntj.2017.1.06 (text/html)
Access is restricted to subscribers and members of the National Tax Association.

Related works:
Working Paper: Public Finance in a Nutshell: A Cobb Douglas Teaching Tool for General Equilibrium Tax Incidence and Excess Burden (2017)
Working Paper: Public Finance in a Nutshell: A Cobb-Douglas Teaching Tool for General Equilibrium Tax Incidence and Excess Burden (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:70:y:2017:i:1:p:155-170

Access Statistics for this article

National Tax Journal is currently edited by Stacy Dickert-Conlin and William M. Gentry

More articles in National Tax Journal from National Tax Association, National Tax Journal Contact information at EDIRC.
Bibliographic data for series maintained by The University of Chicago Press ().