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A Graphical Exposition of the Link between Two Representations of the Excess Burden of Taxation


  • Liqun Liu
  • Andrew J. Rettenmaier


The excess burden of taxation typically has two graphical representations in undergraduate microeconomics and public finance textbooks: the IC/BC (indifference curve/budget constraint) representation and the demand/supply representation. The IC/BC representation has the advantage of showing the behavioral response to a distortionary tax and how a substitution effect alone contributes to the excess burden, whereas the demand/supply representation, also known as the Harberger Triangle, has the advantage of being easily estimated using observable variables. The authors provide a link between the two excess burden representations by illustrating how the Harberger Triangle in the demand/supply framework corresponds to the line segment that represents the excess burden in the IC/BC framework.

Suggested Citation

  • Liqun Liu & Andrew J. Rettenmaier, 2005. "A Graphical Exposition of the Link between Two Representations of the Excess Burden of Taxation," The Journal of Economic Education, Taylor & Francis Journals, vol. 36(4), pages 369-378, October.
  • Handle: RePEc:taf:jeduce:v:36:y:2005:i:4:p:369-378 DOI: 10.3200/JECE.36.4.369-378

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    References listed on IDEAS

    1. Mieszkowski, Peter & Zodrow, George R, 1989. "Taxation and the Tiebout Model: The Differential Effects of Head Taxes, Taxes on Land Rents, and Property Taxes," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1098-1146, September.
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    4. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
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    9. Rubinfeld, Daniel L & Shapiro, Perry & Roberts, Judith, 1987. "Tiebout Bias and the Demand for Local Public Schooling," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 426-437, August.
    10. Kollman, Ken & Miller, John H & Page, Scott E, 1997. "Political Institutions and Sorting in a Tiebout Model," American Economic Review, American Economic Association, vol. 87(5), pages 977-992, December.
    11. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
    12. Brueckner, Jan K., 2000. "A Tiebout/tax-competition model," Journal of Public Economics, Elsevier, vol. 77(2), pages 285-306, August.
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