Date of Graduation

1993

Document Type

Dissertation/Thesis

Abstract

My research investigates the consequences for equity between and within the regions of an economy when one region alters its taxing policy, and the tax change results in a corresponding change in public expenditure. In contrast to extant theory, I incorporate the effects of an accompanying change in public expenditure on tax incidence in my analysis. I demonstrate that actual tax incidence may be quite different from current predictions because the pattern of change in public expenditure has a significant effect on the ultimate incidence of a tax change. I develop a methodological framework to identify the impact of tax policy on the distribution of income among major economic groups within and between regions. I develop a two-region general equilibrium model with two factors and two products, in which one region levies taxes on factors or production, and provides public services out of tax revenues. I identify the factors that determine the nature and direction of the total impact of taxes, and examine the significance of a change in public services for tax incidence. I develop a numerical technique for the unambiguous evaluation of tax incidence in my model. The analysis indicates the dangers of making an a priori assessment of incidence without knowledge of the precise economic structure and income distribution of the regions of an economy.

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