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Capital Utilization in General Equilibrium Tax Models


  • Coates, Dennis


The comparative statics of various taxes in general equilibrium are analyzed when capital utilization is explicitly a choice variable. The principal result is that statements about tax incidence derived in the usual framework, in which utilization is exogenously determined, may be seriously mistaken. Eight of ten propositions proven by Arnold C. Harberger are no longer valid once utilization is endogenous. Tax equivalences proven by Peter Mieszkowski do, however, continue to hold as do many of the results on tax incidence with varying degrees of factor mobility (Charles McLure). Additionally, the analysis demonstrates the effect of the tax on the capital utilization decision.

Suggested Citation

  • Coates, Dennis, 1990. "Capital Utilization in General Equilibrium Tax Models," Public Finance = Finances publiques, , vol. 45(2), pages 241-259.
  • Handle: RePEc:pfi:pubfin:v:45:y:1990:i:2:p:241-59

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