Two Short Papers Detailing Enhancements to FH-ORANI
This document contains two short papers on the theoretical structure of FH-ORANI. The first paper is concerned with local ownership shares for fixed capital in individual industries. The second is concerned with the taxation of earnings of fixed capital. Each paper identifies shortcomings in the current treatment, proposes a new treatment, describes its computer implementation, and presents illustrative simulation results. The first paper proposes two changes relating to local ownership of fixed capital. * In calculating industry shares in aggregate capital stocks, we assume uniformity across industries not in pre-tax rates of return, but in post-tax rates. * In determining local ownership shares for individual industries, we do not assume changes in shares to be uniform across industries, but do require them to be jointly consistent with the change in the economy-wide average local ownership share. Illustrative simulation results show that the new treatment greatly increases the sensitivity of foreign income payments to changes in the economy-wide local ownership share. The second paper proposes several changes relating to taxation of earnings of fixed capital. * Tax reductions arising from depreciation and investment allowances are not apportioned between fixed capital, working capital, and land, but are allocated entirely to fixed capital. * The share of tax on earnings of fixed capital in total tax on non-labour income is not fixed, but varies in response to changes in the composition of non-labour income. * Investors treat the reduction in tax arising from the investment allowance not as an augmentation to their income, but as a partial offset to the purchase cost of capital. Illustrative simulation results show that the new treatment greatly increases the sensitivity of capital usage to changes in the depreciation and investment allowance.
|Date of creation:||Dec 1992|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 03 9919 1877
Web page: http://www.copsmodels.com/about.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hanoch, Giora, 1971. "CRESH Production Functions," Econometrica, Econometric Society, vol. 39(5), pages 695-712, September.
When requesting a correction, please mention this item's handle: RePEc:cop:wpaper:op-71. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Horridge)
If references are entirely missing, you can add them using this form.