$TITLE Model M32: Closed 2x2 Economy -- Equal Yield Tax Reform $ONTEXT Production Sectors Consumers Markets | A B W TL TK CONS ---------------------------------------------------------- PX | 120 -120 PY | 120 -120 PW | 340 -340 PLS | -48 -72 120 PKS | -72 -48 120 100 PL | -100 -100 200 PK | -100 TAX | -20 -20 40 --------------------------------------------------------- $OFFTEXT SETS S /1*5/; PARAMETERS TXL Labor income tax rate, WELFARE(S) Welfare, REALCONS(S) Real consumption of goods, LABSUP(S) Labor supply, CAPTAX(S) Capital tax rate; $ONTEXT $MODEL:M32 $SECTORS: X ! Activity level for sector X Y ! Activity level for sector Y W ! Activity level for sector W (Hicksian welfare index) TL ! Supply activity for L TK ! Supply activity for K $COMMODITIES: PX ! Price index for commodity X PY ! Price index for commodity Y PL ! Price index for primary factor L (net of tax) PK ! Price index for primary factor K (net of tax) PLS ! Price index for primary factor L (gross of tax) PKS ! Price index for primary factor K (gross of tax) PW ! Price index for welfare (expenditure function) $CONSUMERS: CONS ! Income level for consumer CONS $AUXILIARY: TXK ! Endogenous capital tax from equal yield constraint. $PROD:X s:1 O:PX Q:120 I:PLS Q: 40 P:1.2 I:PKS Q: 60 P:1.2 $PROD:Y s:1 O:PY Q:120 I:PLS Q: 60 P:1.2 I:PKS Q: 40 P:1.2 $PROD:TL O:PLS Q:100 P:1.2 I:PL Q:100 A:CONS T:TXL $PROD:TK O:PKS Q:100 P:1.2 I:PK Q:100 A:CONS N:TXK $PROD:W s:0.7 a:1 O:PW Q:340 I:PX Q:120 a: I:PY Q:120 a: I:PL Q:100 $DEMAND:CONS D:PW Q:340 E:PL Q:200 E:PK Q:100 $CONSTRAINT:TXK TXL*PL*TL*100 + TXK*PK*TK*100 =E= 40 * (PX + PY)/2; $OFFTEXT $SYSINCLUDE mpsgeset M32 TXL = 0.20; TXK.L = 0.20; PLS.L = 1.2; PKS.L = 1.2; M32.ITERLIM = 0; $INCLUDE M32.GEN SOLVE M32 USING MCP; M32.ITERLIM = 2000; LOOP(S, TXL = 0.25 - 0.05*ORD(S); $INCLUDE M32.GEN SOLVE M32 USING MCP; WELFARE(S) = W.L; REALCONS(S) = (PX.L*X.L*120 + PY.L*Y.L*120) /(PX.L**0.5*PY.L**0.5*240); LABSUP(S) = TL.L; CAPTAX(S) = TXK.L; ); DISPLAY WELFARE, REALCONS, LABSUP, CAPTAX;