Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/66884
Authors: 
Denton, Frank T.
Mountain, Dean C.
Year of Publication: 
2011
Series/Report no.: 
QSEP Research Report, McMaster University 445
Abstract: 
It has long been recognized that taxing a commodity that generates negative externalities can be used to reduce the consumption of that commodity. A variant involves the imposition of revenue neutrality but that may alter the tax rate required to meet a consumption reduction target. We explore the relationships among the commodity tax rate, the demand and supply elasticities, and the revenue offsets by calibrating a theoretical consumer equilibrium model and then recalibrating it with alternative parameter configurations. For each configuration we simulate equilibrium for three policy scenarios: no neutrality, neutrality achieved by subsidizing other commodities, and neutrality achieved by income transfer.
Subjects: 
Consumer Market Equilibrium
Commodity Taxation
Revenue Neutrality
JEL: 
H23
D11
D58
Document Type: 
Working Paper

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