A Hedonic Approach
New Horizons in Environmental Economics series
Appendix 7: Two-region two type of consumer general equilibrium model
We assume that there are two types of consumers who have the same utility function, that is, the same taste but different endowment. The total proﬁts from ﬁrms and land owners are distributed to consumers R and P by the following rate ␦: 1Ϫ␦. In this appendix, i stands for region and j stands for two types of consumers. We should determine how to collect the cost of the project from these consumers. There are three methods, that is, lump-sum tax from endowment, tax proportional to land rent, and tax proportional to income. It is widely acknowledged that tax distortion exists in the last two tax systems. Since we are not interested in the bias of the tax system in general, we use tax proportional to land rent price which may directly affect the capitalization ratio. These consumers maximize their utilities [*]: max ui(xij , lij , zi ), wi ϩsj ϭxij ϩr h (1ϩTirh)l h . ij ij h xi j ,li j (A7.1) T irh is a tax rate. The endowments are: sp ϭ␦/NP sR ϭ(1Ϫ␦)/NR ϭ (A7.2) (A7.3) ͚m ͚n r i i j h h f f ij ij l ij ϩri l i (A7.4) (A7.5) (A7.6) Vj [wi ϩsj, rh(1ϩT irh) zi ]ϵU [xij (⍀), r h (⍀), zi ] ij ij ⍀ϭ⍀[wi ϩsj, r h(1ϩTirh) zi ]. ij From the maximization of land owners’ proﬁts, we can get: r h ϭr hϭrifϭri . ij i (A7.7) Firms maximize their proﬁts [*], thus we can...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.