Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149352
Authors: 
Fullerton, Don
Ta, Chi L.
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6265
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.
Subjects: 
computable general equilibrium
economic efficiency
distribution of burdens
sources side
uses side
equivalent variation
JEL: 
A20
C63
C68
D04
D58
H21
H22
H23
H24
H25
Document Type: 
Working Paper

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