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Sensitivity analysis of tax incidence in a spatial equilibrium model

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Abstract

In this paper, we show that the impact of an ad valorem tax on demand prices is the same for all interrelated spatial regions regardless of sizes of their price elasticities. In the case of a degenerate spatial equilibrium model in which several independent submarkets develop, the tax incidence is identical within a submarket; but varies between different submarkets. In the case of non-linear and/or non-separable demand and supply functions, the same results hold as long as (i) the tax does not affect unit transportation costs and (ii) a unique equilibrium commodity flow solution exists.

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Authors and Affiliations

  1. Clarion University of Pennsylvania, 16214, Clarion, PA, USA

    Chin W. Yang

  2. National Chung Cheng University, Taiwan

    Chin W. Yang

  3. SUNY-Plattsburgh and Page Associates, 12901, Plattsburgh, NY, USA

    Walter P. Page

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  1. Chin W. Yang
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  2. Walter P. Page
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Yang, C.W., Page, W.P. Sensitivity analysis of tax incidence in a spatial equilibrium model. Ann Reg Sci 27, 241–257 (1993). https://doi.org/10.1007/BF01581661

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  • DOI: https://doi.org/10.1007/BF01581661

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