Policy Evaluation: Taxation

Abstract

Models of the sort developed in this volume have several important, potential, applications. On the one hand, they are normative in nature and may serve as the basis of planning models for individual decision-making entities. On the other hand, they may be descriptive of the general reaction of typical or “average” individual decision-making entities to exogeneous parametric changes. As descriptions of “average” decision-making entities (i.e., firms) and of their sensitivity to parametric manipulation, the models become potential instruments for the evaluation of governmental policies that influence parameters of firms’ decision making. For purposes of discussion, three types of governmental activities will be considered here, namely: taxation, regulation, and locational incentives.