The marginal efficiency effects of taxes and subsidies in the presence of externalities. A computational general equilibrium approach

Published

Journal Article

Using 1983 data, we develop a 19-sector computational general equilibrium model, incorporating producer-producer externalities and producer-consumer externalities. Simulation results indicate that when additional government expenditure is financed by Pigouvian taxes, the marginal cost of public funds is substantially below one. Labor, sales, and output taxes also affect the output of the polluting industries, and thus have indirect Pigouvian effects which tend to reduce the associated marginal costs of public funds. Pigouvian taxes are usually more efficient than Pigouvian subsidies, since the tax revenue can be used to reduce other taxes. © 1993.

Full Text

Duke Authors

Cited Authors

  • Ballard, CL; Medema, SG

Published Date

  • January 1, 1993

Published In

Volume / Issue

  • 52 / 2

Start / End Page

  • 199 - 216

International Standard Serial Number (ISSN)

  • 0047-2727

Digital Object Identifier (DOI)

  • 10.1016/0047-2727(93)90020-T

Citation Source

  • Scopus