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“General Equilibrium Analysis of Environmental Tax Policy” Three lectures/workshops (7, 8, 14 of May 2013). Prof. Fullerton will provide a mini-course for economics graduate students about how to build and use analytical general equilibrium models. The “log-linearization” method provides a remarkably easy and useful way to analyze topics in applied areas such as public, environmental, development, and trade economics. For a small policy change such as an increase in a particular tax rate or environmental restriction, this approach allows the researcher to solve analytically for the resulting changes in each price and quantity, as well as changes in economic welfare. Changes in factor prices and output prices indicate “incidence” of the policy, but changes in quantities are useful for study of pollution and other outcomes. Students will undertake an assignment before each of the three classes: 1. 2. 3. 4. Before the first class, read Harberger (1962) and the 14 pages in “Tax Incidence”. Come to a 90 minute lecture describing the method (subtitle: “Methods of Model Building”). Read Bovenberg and de Mooij (1994). Also, read and replicate “Negative Leakage”. Come to a second class to discuss those readings and alternative applications in other areas. We can point to other papers you could find in public economics, trade, development, or environmental economics (subtitle: “Applications of the Method”). 5. Think about a possible research project or proposal with your own idea. 6. Come to a final class to discuss those proposals (subtitle: “Discussion of Research Ideas”). READING LIST Bovenberg, A.L., and R. A. de Mooij (1994), “Environmental Levies and Distortionary Taxation,” American Economic Review 84 (4), 1085–1089. Fullerton, D., D.H. Karney, and K. Baylis (2011), “Negative Leakage,” CESifo Working Paper No. 3379 (2011). Read all (11 pages). Fullerton, D. and G. Metcalf (2002), “Tax Incidence”, in A. Auerbach and M. Feldstein, eds., Handbook of Public Economics, Vol. 4, Amsterdam: Elsevier. Primarily just pages 1789-1802 (14 pages). Harberger, A. C. (1962), “The Incidence of the Corporation Income Tax,” Journal of Political Economy 70(3): 215-40 (skim or read to the extent of your interest).