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ERIC Number: EJ725264
Record Type: Journal
Publication Date: 2005-Sep-22
Pages: 10
Abstractor: Author
ISBN: N/A
ISSN: ISSN-0022-0485
EISSN: N/A
A Graphical Exposition of the Link between Two Representations of the Excess Burden of Taxation
Liu, Liqun; Rettenmaier, Andrew J.
Journal of Economic Education, v36 n4 p369 Fall 2005
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.
Heldref Publications, Helen Dwight Reid Educational Foundation, 1319 Eighteenth Street, NW, Washington, DC 20036-1802. Web site: http://www.heldref.org.
Publication Type: Journal Articles; Reports - Descriptive
Education Level: Higher Education
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A
Grant or Contract Numbers: N/A