tax policy asset prices and growth a general equilibrium analysis abstract this paper presents a computable general equilibrium tax policy model that combines a consideration of disaggregate industry effects with an integrated treatment of short and long run adjustments to policy initiatives the model s explicit consideration of forward looking investment decisions and adjustment dynamics permits assessments of short run effects of tax policy on asset values as well as long term impacts on capital accumulation simulations reveal that effects on asset values and investment depend critically on whether policies are oriented toward new or old capital investment tax credits yield significant increases in investment without conferring windfall gains to corporate shareholders corporate tax cuts with the same revenue cost on the other hand yield large windfalls to shareholders while providing only a modest investment stimulus incidence and growth effects differ considerably across sectors particularly between business and housing

transition losses of partially mobile industry specific capital in estimating the economic effects of public policy comparative static models typically assume homogenous factors that are either mobile or immobile for changes designed to improve factor allocations the former assumption would overstate welfare gains while the latter would understate them the model in this paper restricts each industry s capital reduction to its rate of depreciation the stock of depreciated capital represents an industry specific type of capital that may earn a lower equilibrium return this model suggests that previous estimates of efficiency gains from integration of u s personal and corporate income taxes are overstated by 5 billion

investment and abandonment behavior of rural households an empirical investigation this article uses models of irreversible investment under uncertainty to examine the investment and abandonment behavior of poor rural households it considers the decision of ugandan coffee farming households to invest in or abandon coffee trees the observed levels of investment and abandonment are found to be consistent with models of investment that allow for irreversibility uncertainty fixed costs and liquidity constraints the findings highlight the importance of addressing volatility irreversibility fixed costs and liquidity constraints in order to increase households responsiveness to changes in the fundamentals and to enable households to recover from shocks to their capital stock

an intertemporal general equilibrium analysis of financial crowding out a policy model and an application to australia abstract this paper constructs a two period perfect foresight general equilibrium model that analyzes crowding out private investment is debt financed while government deficits are financed by money and debt the existence of equilibrium is demonstrated and the model is applied to australia for 1981 1982 the last years for which australia had a fixed exchange rate a benchmark solution is derived and two counterfactual simulations are carried out small increases in real government spending are found not to lead to crowding out while an increase in the debt financed portion of the government s budget deficit does lead to crowding out

optimal tax reform in the presence of adjustment costs abstract the optimal implementation of an efficiency enhancing capital taxation reform is examined when the government is concerned about arbitrary reform induced redistributions and investment causes firms to incur adjustment costs theoretical results indicate that immediate partial enactment of reform is optimal with concave adjustment costs while with convex adjustment costs the optimal reform implementation policy is either i immediate partial enactment with sufficiently low adjustment costs ii phased in partial enactment with intermediate adjustment costs or iii postponed partial enactment with sufficiently high adjustment costs numerical results suggest that relative to the optimal one step implementation policy little is gained by phasing in reform

a long march perspective on tobacco use in canada in this paper we present a model of tobacco demand in canada with a view to establishing if price and tax policy on the one hand or educational regulatory and demographic influences on the other have been primarily responsible for the substantial drop in consumption since 1980 we address some methodological and econometric issues that have escaped the attention of some analysts to this point using data for the period 1972 2000 we find that non price developments have had a strong deterrent effect and that the price elasticity of demand is now lower than even the recently obtained low estimates propose these findings have strong public policy content jel classification i12 c13 c22 une perspective de longue haleine sur l usage du tabac au canada dans ce memoire on presente un modele de la demande de tabac au canada en vue d etablir laquelle des deux strategies d une part la politique de prix et d imposition de taxes et d autre part les influences de l education de la reglementation ainsi que les changements demographiques a ete davantage responsable de la chute importante dans la consommation du tabac depuis 1980 le texte examine certains problemes methodologiques et econometriques qui ont jusqu ici echappea l attention des analystes a l aide de donnees pour la periode 1972 2000 on montre que les facteurs qui n ont rien a voir avec le prix ont eu un fort effet dissuasif et que l elasticite de la demande par rapport au prix est maintenant plus faible que les faibles elasticites suggerees par certaines etudes recentes ces resultats ont une grande importance pour la politique publique

applied general equilibrium models of taxation and international trade an introduction and survey we wish to acknowledge the help of three referees and of john pencavel on several earlier drafts as well as the assistance of the modelers whose work is referred to in the paper they corrected our lack of understanding of their work and provided many other helpful comments excellent research and bibliographical assistance have been provided by debbie fretz radwan shaban and janet stotsky helpful comments have been made by charles ballard michael boskin lans bovenberg sylvester damus harvey galper glenn harrison gordon lenjosek jack mutti serena ng t n srinivasan charles stuart and eric toder the authors also acknowledgefinancial support from the national bureau of economic research the national science foundation international business machines and the social sciences and humanities research council ottawa canada

costly reversible investment with fixed costs an empirical study the analysis presented here applies a generalized version of the friction model to costly reversible investment with fixed costs of investment the analysis investigates three u s industries the computer and office equipment industry the automobile industry and the airline industry five different investment models are compared because some models are nonnested the analysis employs vuong s test of model selection the analysis shows that the investment model with costly reversibility and fixed costs is the best among the models in addition the analysis suggests the existence of convex adjustment costs of investment

are cigarette bans really good economic policy this study investigates the quarterly relationship between the quantity of cigarettes sold real disposable income per capita and the relative price level of cigarettes in canada careful attention is paid to the nonstationarity of the data and the dynamic specification of the model it is concluded that cigarette demand is extremely insensitive to price and income changes this is evidence of the large consumer surplus smokers enjoy and the large revenue increasing potential of a cigarette tax increase policy as opposed to cigarette bans

the effects of price and smoking risk information on the demand for tobacco in taiwan an empirical study this study evaluates the effects of a cigarette price increase and smoking risk information on tobacco consumption in taiwan tobacco price expenditure and an index of smoking risk information for taiwan were introduced into a central bureau of statistics cbs demand model to estimate several cigarette demand elasticity coefficients according to this model increasing the cigarette price is a more effective means of reducing cigarette consumption than disseminating more risk information in addition we found that a price rise of nt 5 per cigarette pack would cause a reduction in the consumption of domestic and imported cigarettes of 3 23 and 4 86 packs per capita respectively total per capita consumption of cigarettes would be reduced annually by 8 09 packs 7 56 despite this reduction in cigarette consumption the increase in cigarette price would at the same time lead to a significant net increase in tax revenue to the taiwan government

the welfare cost of factor taxation in a perfect foresight model this paper examines the marginal efficiency cost of various factor taxes in a dynamic general equilibrium model the au thor solves for the excess burden of anticipated and unanticipated t emporary and permanent tax policies using a range of estimates for taste and technology parameters he finds excess burdens larger than those indicated by previous studies that use static models these exc ess burdens are sensitive to parameter values and timing however th e rankings of alternative tax policies turn out to be insensitive to structural parameter values copyright 1987 by university of chicago press

estimating price elasticities when there is smuggling the sensitivity of smoking to price in canada a central parameter for evaluating tax policies is the price elasticity of demand for cigarettes but in many countries this parameter is difficult to estimate reliably due to widespread smuggling which significantly biases estimates using legal sales data an excellent example is canada where widespread smuggling in the early 1990s in response to large tax increases biases upwards the response of legal cigarette sales to price we surmount this problem through two approaches excluding the provinces and years where smuggling was greatest and using household level expenditure data on smoking these two approaches yield a tightly estimated elasticity in the range of 0 45 to 0 47 we also show that the sensitivity of smoking to price is much larger among lower income canadians in the context of recent behavioral models of smoking whereby higher taxes reduce unwanted smoking among price sensitive populations this finding suggests that cigarette taxes may not be as regressive as previously suggested finally we show that price increases on cigarettes do not increase and may actually decrease consumption of alcohol as a result smuggling of cigarettes may have raised consumption of alcohol as well

the synthesis of bottom up and top down approaches to climate policy modeling electric power technologies and the cost of limiting us co2 emissions abstract in the us the bulk of co 2 abatement induced by carbon taxes comes from electric power this paper incorporates technology detail into the electricity sector of a computable general equilibrium model of the us economy to characterize electric power s technological margins of adjustment to carbon taxes and to elucidate their general equilibrium effects compared to the top down production function representation of the electricity sector the technology rich hybrid specification produces less abatement at a higher welfare cost suggesting that bottom up models do not necessarily generate lower costs of abatement than top down models this result is shown to be sensitive to the elasticity with which technologies generating capacities adjust to relative prices

do expenditures on tobacco control decrease smoking prevalence effectiveness of tobacco control programmes in reducing smoking prevalence during 2001 to 2005 is examined tobacco control spending is found to exert no significant effects on smoking prevalence across the 50 states cigarette prices are found to lower prevalence of daily smokers but exert no effect on nondaily smoking prevalence several reasons are suggested for why these results might conflict with previous research these include that most previous studies examined two states california and massachusetts with long standing tobacco control programmes and that most studies examined periods in which many of the states in their samples did not actively fund their programmes another reason may be that unlike most previous studies this study controls for the possibility that tobacco control spending is endogenous when for example states exhibiting relatively low smoking prevalence are also states with relatively high distaste for smoking and accordingly fund tobacco control programmes more generous

the corporate tax in an intertemporal equilibrium model with imperfectly mobile capital this paper examines how alternative capital mobility assumptions affect the inci dence and efficiency of corporate income taxation it uses a two sect or intertemporal equilibrium model in which imperfectly elastic inves tment captures the notion of imperfectly mobile capital if investmen t is infinitely elastic which implies perfectly mobile capital a lo wer corporate income tax yields substantial efficiency gains and bene fits all agents if investment is less elastic however the economy wide efficiency gains are smaller and labor suffers welfare losses i f the goods supplied by the two sectors are close substitutes noncor porate capital loses also and only corporate capital benefits copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the effectiveness of anti smoking legislation a review abstract this survey focuses on government efforts to curb the use of undesirable goods notably tobacco products we synthesize the economics literature and examine the effectiveness of government curbs on tobacco consumption through non price controls such as bans on cigarette advertising health warnings and workplace smoking bans and price measures or higher prices through higher taxes this literature review is unique in that we do not merely aim to provide a summary of the literature rather our main focus is to draw conclusions from the literature regarding the effectiveness of alternate policy measures across countries in checking smoking and to provide directions suggestions for extending the scope of government intervention to other tobacco products

an empirical analysis of milk addiction we show the estimable rational addiction model tends to yield spurious evidence in favor of the rational addiction hypothesis when aggregate data are used direct application of the canonical model yields results seemingly indicative that non addictive commodities such as milk eggs and oranges are rationally addictive monte carlo simulation demonstrates that such results are likely to obtain whenever the commodity under scrutiny exhibits high serial correlation or when even a small amount of the variation in prices is endogenous or when overidentified instrumental variables estimators are used or when commonly imposed restrictions are employed we conclude that time series data will often be insufficient to differentiate rational addiction from serial correlation in the consumption series

estimating irreversible investment with financial constraints an application of switching regression models this analysis investigates irreversible investment with financial constraints when investment is irreversible zero investment can be optimal and investment becomes lumpy because external funds are not a perfect substitute for internal funds financially constrained firms invest differently than unconstrained firms to incorporate both irreversibility and financial constraints into estimations the analysis develops a switching regression model that depends on the real options theory of capital investment the analysis investigates three us industries the oil refining communications equipment manufacturing and semiconductor manufacturing industries the analysis shows that internal funds affect investment if a firm is financially constrained