$TITLE Model M34: Closed 2x2 Economy -- Public Provision $ONTEXT Production Sectors Consumers Markets| X Y G W1 W2 CONS1 CONS2 GOVT --------------------------------------------------------------- PX | 100 -70 -30 PY | 100 -30 -70 PG | 50 -50 PL | -50 -30 -20 50 50 PK | -30 -50 -20 50 50 TAX | -20 -20 -10 50 PW1 | 125 -125 PW2 | 125 -125 PG1 | -25 25 PG2 | -25 25 --------------------------------------------------------------- $OFFTEXT PARAMETERS TAX Tax rate on factor inputs to all sectors; $ONTEXT $MODEL:M34 $SECTORS: X ! Activity level for sector X Y ! Activity level for sector Y G ! Activity level for sector G (public provision) W1 ! Activity level for sector W1 (consumer 1 welfare index) W2 ! Activity level for sector W2 (consumer 2 welfare index) $COMMODITIES: PX ! Price index for commodity X PY ! Price index for commodity Y PG ! Price index for commodity G (marginal cost of public output) PL ! Price index for primary factor L (net of tax) PK ! Price index for primary factor K PW1 ! Price index for welfare (consumer 1) PW2 ! Price index for welfare (consumer 2) PG1 ! Private valuation of the public good (consumer 1) PG2 ! Private valuation of the public good (consumer 2) $CONSUMERS: CONS1 ! Consumer 1 CONS2 ! Consumer 2 GOVT ! Government $AUXILIARY: LGP ! Level of government provision $PROD:X s:1 O:PX Q:100 I:PL Q: 50 P:1.25 A:GOVT T:TAX I:PK Q: 30 P:1.25 A:GOVT T:TAX $PROD:Y s:1 O:PY Q:100 I:PL Q: 30 P:1.25 A:GOVT T:TAX I:PK Q: 50 P:1.25 A:GOVT T:TAX $PROD:G s:1 O:PG Q: 50 I:PL Q: 20 P:1.25 A:GOVT T:TAX I:PK Q: 20 P:1.25 A:GOVT T:TAX $PROD:W1 s:1 O:PW1 Q:125 I:PX Q: 70 I:PY Q: 30 I:PG1 Q: 50 P:5 $PROD:W2 s:1 O:PW2 Q:125 I:PX Q: 30 I:PY Q: 70 I:PG2 Q: 50 P:0.5 $DEMAND:GOVT D:PG $DEMAND:CONS1 D:PW1 Q:125 E:PL Q: 50 E:PK Q: 50 E:PG1 Q: 50 R:LGP $DEMAND:CONS2 D:PW2 Q:125 E:PL Q: 50 E:PK Q: 50 E:PG2 Q: 50 R:LGP $CONSTRAINT:LGP LGP =E= G; $OFFTEXT $SYSINCLUDE mpsgeset M34 PW2.FX = 1; PW1.L = 2.8; TAX = 0.25; LGP.L = 1; PG1.L = 5; PG2.L = 0.5; M34.ITERLIM = 0; $INCLUDE M34.GEN SOLVE M34 USING MCP; M34.ITERLIM = 2000; $INCLUDE M34.GEN SOLVE M34 USING MCP; * The following counterfactuals check that the original * benchmark is indeed an optimum by raising/lowering the tax TAX = 0.20; $INCLUDE M34.GEN SOLVE M34 USING MCP; TAX = 0.30; $INCLUDE M34.GEN SOLVE M34 USING MCP;