Computable General Equilibrium Models of Tax Incidence
The CGE approach to modeling an economy was made possible by Herbert Scarf's algorithm for solving complete general equilibrium models of a stylized economy, which Scarf published in 1967 (Scarf, 1967, 1969). The application of CGE techniques to overall tax incidence became popular in the 1970s, with John Shoven and John Whalley leading the way,23 and CGE modeling is still very much in use today.
CGE models of tax incidence are the discrete version of Harberger's general equilibrium marginal analysis. Their appeal is that they can consider very broad incidence questions, such as the overall incidence of the federal and state personal income taxes or the incidence of replacing income taxes with ...
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