Production externalities and corrective subsidies: A general equilibrium analysis |
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Authors: | Stuart Mestelman |
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Institution: | Department of Economics, McMaster University, Hamilton, Ontario, L8S 4M4, Canada |
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Abstract: | Several recent attempts have been made to demonstrate that corrective subsidies and taxes do not have symmetric allocation effects. These demonstrations have utilized graphical partial equilibrium analysis. In this paper a general equilibrium model is introduced to show that a standard partial equilibrium result may be incorrect and that subsidies may lead to equilibrium states which are socially preferred to the status quo position. |
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