Taxation in Walrasian Economy

We consider two models of lump sum taxation in pure exchange economy in which the state imposes taxes on (or offers financial aid to) economic agents characterized by their demand functions and initial resources. In the first model the state has its own preferences and uses the collected money to enter the market and maximize its utility while in the second model it uses the taxes to acquire fixed resources necessary for its functioning. We study the existence and structure of equilibria in general economies, the possibility of using taxation to realize Pareto optimal allocations, and the role of taxation as a possible cause of inflation. Special attention is paid to economies with gross substitutability. Bibliography 18 items.