A Disaggregate Equilibrium Model of the Tax Distortions among Assets, Sectors, and Industries.

This paper encompasses multiple sources of inefficiency into a single general equilibrium model of the U.S. tax system. The authors measure interasset distortions using disaggregate calculations of user cost, and intersectoral distortions from the differential treatment of the corporate sector, noncorporate sector, and owner-occupied housing. Industries in the model have different uses of assets and degrees of incorporation. Results indicate that distortions between sectors, or among industries, are much smaller than previously thought. Distortions among assets are larger, but the total of all these welfare costs is still below one percent of income. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.