John Whalley, Philip M. White, A Decomposition Algorithm for General Equilibrium Computation with Application to International Trade Models: A Correction, Econometrica, Vol. 53, No. 3 (May, 1985), p. 679

This paper presents a method for assessing the relative importance of price increases and strengthened individual incentives due to the introduction of the responsibility system for the post-1978 increase in China's agricultural productivity. Data on post-1978 Chinese agricultural performance suggest that a little over three-quarters of the measured productivity increase is due to payment system changes and the remainder to price increases. We also use our method to calculate incentive indices, giving an estimate of the fraction of their marginal product that peasants received under the pre-1978 regime.

This paper presents a method for assessing the relative importance of price increases and strengthened individual incentives due to the introduction of the responsibility system for the post-1978 increase in China's agricultural productivity. Data on post-1978 Chinese agricultural performance suggest that a little over three-quarters of the measured productivity increase is due to payment system changes and the remainder to price increases. The authors also use their method to calculate incentive indices, giving an estimate of the fraction of their marginal product that peasants received under the pre-1978 regime.

This paper evaluates calculations of net fiscal incidence, using an applied general equilibrium model of Australia into which public goods are incorporated. Results indicate that it is inappropriate to regard the redistributive impacts of government policies as a zero sum game. For large reductions in public goods provision and taxes, the dominant effect is the foregone consumer surplus from suboptimal public goods provision. In addition, the redistributive pattern of small charges are quite different from large charges. Marginal and average net fiscal incidence, thus, need to be clearly separated, a point not emphasized in existing literature.

We develop a general equilibrium tax model to evaluate the impacts of equal yield base broadening in indirect taxes from high rate narrow based (typically manufactures) taxes to broad based taxes (including services) such as a VAT. We capture differences in choice of mode of supply between market goods, such as manufactures, which cannot be supplied other than through the market, and self-suppliable services and informal sector supplied products. Using this formulation, we are able to provide numerical examples of welfare worsening VAT base broadening, which expands the tax base from market based manufactures, in which there are few (or no) non taxed supply possibilities, to all goods and services where such possibilities exist. We show that the usual presumption that there are welfare benefits from equal yield VAT base broadening breaks down once tax induced increases in self supply of previously non taxed goods and services and in informal sector activity (in small scale construction and other areas) are taken into account. Moreover, since untaxed informal sector supply is typically from lower income to higher income households, they gain as comparable informal sector activity is taxed under the base broadening change. We provide a calibrated version of the model, which captures Canadian base broadening accompanying the introduction of the Canadian VAT (GST) in 1990.

This paper reports a set of lifetime tax incidence calculations using a life cycle simulation model for Canada due to Davies (1979a, 1982). A repeatedly stated qualification to annual calculations in the empirical tax incidence literature is that it would be more satisfactory to make calculations on a lifetime basis. Even though it is acknowledged that lifetime tax incidence could well differ from annual, it is widely believed that data and other difficulties make such calculations next to impossible. Indeed, the widespread acceptance of the data problems of lifetime calculations seems also to have inhibited speculation about how lifetime tax incidence might differ from annual. As a result, redistributive tax policy judgments continue to be based on annual incidence calculations in spite of the reservations many have about their usefulness. Our paper is intended to reorient discussion towards lifetime tax incidence by providing some initial null hypotheses about the shape of lifetime tax profiles. Our main finding is that under the standard competitive assumptions common in the incidence literature, lifetime and annual incidence calculations both produce mild progression in tax rates across household deciles (ignoring the bottom decile in the annual calculation). While the income tax is less progressive in lifetime than in annual calculations, other taxes are for the most part less regressive. Also, lifetime incidence calculations are much more robust to alternative shifting assumptions than annual calculations. In the lifetime context, key distributions such as earnings, transfer payments, and consumption are less heavily concentrated in particular percentiles of the population than is true in annual data. As a result, changing the allocative series for any particular tax does not have the large effect on incidence results found in annual calculations.' Each component of the tax system is allocated to households grouped by lifetime income using particular distributive series following a procedure similar to that employed in annual incidence calculations (for example, Richard Musgrave et al., 1974; Joseph Pechman and Benjamin Okner, 1974; Edgar Browning and William Johnson, 1979; W. Irwin Gillespie, 1980). In the process we are able to compare lifetime and annual incidence calculations using the same data set. In both lifetime and annual calculations, we allocate five groups of taxes among households using distributive series which come partly from the 1971 Statistics Canada Survey of Consumer Finances (SCF) and partly from our life cycle simulation model. The SCF data are used to construct synthetic longitudinal lifetime profiles of earnings and transfer payments for a sample of 500 households. The latter are assigned inheritances by simulating patterns of mortality and bequest. These data are then used in the life cycle model to generate lifetime consumption profiles and bequests. The earnings, transfer, and inheritance data, plus the model output provide the distributive series on which alternative incidence calculations are based. While the incidence calculations presented in this paper use Canadian data, results would likely be similar for the United States

Under a progressive income tax, conventional wisdom is that taxing individuals rather than households is preferred from an efficiency point of view. The reason is that secondary workers, whose labor supply elasticity is high, will be taxed at a lower marginal rate than primary workers, whose labor supply elasticity is low. Here, we argue that once household production is taken into account, things are more complicated since tax design should also not distort the input of family members' time in household production. Factor input distortions as well as Ramsey considerations thus need to enter the choice of the tax unit. We provide a numerical example of an economy for which a move from an individual to a household basis in the income tax can be efficiency improving. We then use a general equilibrium model, parameterized using Australian tax rates and data, whose results clearly show that welfare gains can occur under changes from an individual to a household basis for an existing income tax. Our results thus challenge conventional wisdom and suggest that household unit taxation deserves more sympathetic consideration than is currently the case.

This paper presents estimates of static and dynamic general equilibrium resource allocation effects for four alternative plans for corporate and personal income tax integration in the United States. A medium-scale numerical general equilibrium model is used which integrates the U.S. tax system with consumer demand behavior by household and producer behavior by industry. Results indicate that total integration of personal and corporate taxes would yield an annual static efficiency gain of around $6 billion (1973 dollars). Partial integration plans yield less. Dynamic effects are larger, and our analysis indicates that full integration may yield gains whose present value is as large as $500 billion or about 1.0 percent of the discounted present value of the GNP stream to the U.S. economy after correction for population growth. Plans differ in their distributional impacts, although these findings depend on the nature of replacement taxes used to preserve government revenues. The size of dynamic resource allocation effects is sensitive to the choice of the replacement tax, while static gains are reasonably robust.