Should Benefit–Cost Analyses Take Account of General Equilibrium Effects?

V. Kerry Smith and Jared C. Carbone

A chapter in Research in Law and Economics, 2007, pp 247-272 from Emerald Group Publishing Limited

Abstract: This paper demonstrates the importance of general equilibrium (GE) feedback effects inside and outside markets for the measurement of the efficiency costs of taxes in a distorted economy. Our specific focus is on the changes in environmental amenities that can result from pollution externalities generated from production activities. Even when amenities are under three percent of virtual income, the error in the GE approximations of the welfare effects of new taxes with pre-existing distortions can increase threefold. The nature of the link between the source of the external effects influencing amenities and the changes in amenity services can alter the conclusions one would make about the merits of an intervention based on benefit–cost analyses.

Date: 2007
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.101 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.101 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
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:eme:rlwezz:s0193-5895(07)23011-8

DOI: 10.1016/S0193-5895(07)23011-8

Access Statistics for this chapter

More chapters in Research in Law and Economics from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().