Efficiency Effects of Alternative Tax Policies Designed to Replace the Revenue Lost from a Terms-of-Trade Shock
(All values are in millions of 1991 TT dollars unless otherwise noted)
|Replace Revenue with change in|
|VAT tax rate||Production tax|
and VAT tax rate
|Tax rates (in percent)|
|Percent change in real wage||-1.2||-4.2||-7.0|
The equivalent variation is computed by: EV = E(P0, U1) - E(P0, U0), where E(P, U) is the expenditure function, U0 is the initial level of utility, U1 is the new level of utility, and P0 is the vector of initial prices.