Abstract
A computational method is presented for obtaining a general equilibrium solution in a static neoclassical model of an economy which has intermediate products, exports and imparts, and tax distortions. Using an input-output table, the parameters of the various demand and supply functions in the economy can be chosen so that the general equilibrium solution exactly replicates the real world. The model is then applied to estimate the effects of commodity tax distortions in the Canadian economy using various assumptions about the form of production functions. The method is to replace the commodity tax distortions with lump-sum taxes, compute a new general equilibrium solution, and compare it with the original one to obtain changes in resource allocation, relative prices, the exchange rate, and economic welfare.
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