Charles L. Ballard

Basic Math Skills and Performance in an Introductory Economics Class.

The authors measure math skills with a broader set of explanatory variables than have been used in previous studies. To identify what math skills are important for student success in introductory microeconomics, they examine (1) the students score on the mathematics portion of the ACT Assessment Test, (2) whether the student has taken calculus, (3) whether the student has been required to take remedial mathematics, and (4) the students score on a test of very basic mathematical concepts. All four measures have significant effects in explaining performance in an introductory microeconomics course. The authors find similar results, regardless of whether they use self-reported information from students or official administrative records from the university. The results suggest that improvements in student performance may depend on improved mastery of basic algebra.

The marginal efficiency effects of taxes and subsidies in the presence of externalities: A computational general equilibrium approach

Abstract Using 1983 data, we develop a 19-sector computational general equilibrium model, incorporating producer-producer externalities and producer-consumer externalities. Simulation results indicate that when additional government expenditure is financed by Pigouvian taxes, the marginal cost of public funds is substantially below one. Labor, sales, and output taxes also affect the output of the polluting industries, and thus have indirect Pigouvian effects which tend to reduce the associated marginal costs of public funds. Pigouvian taxes are usually more efficient than Pigouvian subsidies, since the tax revenue can be used to reduce other taxes.

Marginal welfare cost calculations: Differential analysis vs. balanced-budget analysis

Abstract In a differential analysis, tax revenue collections are held constant. In a balanced-budget analysis, the spending level is changed, and the level of distortionary taxation is changed correspondingly. Here, income effects are important, and efficiency calculations depend chiefly on uncompensated elasticities, unless government exhaustive expenditure is assumed to substitute closely for cash. A small-scale computational general equilibrium model is constructed, and differential and balanced-budget experiments are performed. Results show that marginal welfare costs, calculated from balanced-budget experiments, can be negative when labor supply functions are backward-bending. Interactions among parameter values and efficiency costs are explored.

Gender, Expectations, And Grades In Introductory Microeconomics At A Us University

Previous studies have documented a gender gap in the study of economics in Canada, the UK, and the US. One important factor may be womens low expectations about their ability to succeed in economics courses. Women in our sample expect to do less well than men in an introductory microeconomics course, even after controlling for variables relating to family background, academic experience, and mathematics experience. These expectations are partly self-fulfilling, since expected grades have an important and positive effect on class performance. We also find that having taken an economics course in secondary school actually has a negative effect on performance. We observe this negative effect for women and men, but it is more pronounced for women. When we control for both expectations and secondary-school experience with economics, the independent effect of gender is small and insignificant.

The effects of economic integration in the Pacific Rim: A computational general equilibrium analysis

Abstract We simulate the effects of economic integration in the Pacific Rim, using a multi-sector, multi-region, computational general equilibrium model. We use both a perfectly-competitive model (in which cross-hauling is explained by the Armington assumption) and a model with firm-level imperfect competition. Both the perfectly-competitive model and the imperfectly-competitive model suggest that a Pacific free-trade area (FTA) and an East-Asia FTA would generate gains for all member countries, even without the participation of Japan and the United States. The developing nations of Asia are expected to gain more when the United States joins the FTA than when Japan joins. The imperfectly-competitive model simulates substantially larger welfare gains than does the perfectly-competitive model. According to the imperfectly-competitive model, the newly-industrialized countries of Asia would reap very large gains from the establishment of a free-trade area.

On the Specification of Simulation Models for Evaluating Income and Consumption Taxes

Economists have emphasized a number of possible advantages of consumption taxation over income taxation.1 One of the most important of these has to do with dynamic efficiency. It is often asserted that increased reliance on consumption taxation would result in welfare gains.2 However, from the perspective of the policymaker, it may not suffice merely to assert that consumption taxation is better. In order to have much chance of overcoming the inertia of the political system, it may be necessary for economists to show that the efficiency gains are, in some sense, large.

International ramifications of US tax-policy changes

Abstract We integrate trade modeling and tax modeling, by evaluating the international spillover effects of changes in US tax policy. We use a static computational general-equilibrium model that divides the world into four regions, with data for 1995 from the Global Trade Analysis Project. We incorporate a labor/leisure choice and international cross-ownership of assets. Our simulations suggest that unilateral elimination of US capital taxation generates welfare gains for the United States. If the other regions do not respond to the US policy change, they suffer welfare losses. However, if all regions eliminate capital taxes, welfare gains accrue for the entire world.

EXPECTATIONS IN NUMERICAL GENERAL EQUILIBRIUM MODELS

The assumptions of myopia and of perfect foresight define polar cases concerning the availability of information about the future. In this paper we have developed a consistent general equilibrium model in which the amount of information available can be varied systematically within these extremes. We also report and interpret the results of simulations of various tax policies under different specifications as to the amount of foresight which consumers have. One of our main findings is that the social value of additional foresight can be negative: more foresight can lead to lower welfare. This occurs under policies like a consumption tax which lead to capital deepening and a declining price of capital over time. To the extent that consumers have more foresight, they become better able to anticipate these declines in capital prices and they lower their estimation of the rate of return to capital. Consequently, they save less and, given the existence of taxes on capital and the discrepancy between the social and private return to capital, the reduction in saving leads to lower welfare. We suggest that the welfare impact of additional foresight is fundamentally connected to the discrepancy between the social value of the last dollar of saving and consumption in a second-best world. We test this hypothesis by performing simulations in a counterfactual world in which the marginal values of saving and consumption are closer to equality. Results from these simulations support our hypothesis, as the welfare effects of changes in foresight are significantly smaller. The level of foresight attributed to consumers can affect significantly the welfare gain or loss afforded by alternative tax policies, although policy changes which produce welfare gains under the assumption of myopic behavior also show gains under perfect foresight. We find that the welfare gain from adopting a consumption tax is reduced from 5 to 10 percent when we move from myopia to a great deal of foresight.

Temporary Equilibrium: A History of Applied General-Equilibrium Analysis

After the existence of general equilibrium was proved in the early 1950s, the next decade brought applications of general-equilibrium theory to policy issues such as the welfare effects of tariffs and the incidence of the corporate income tax. By the 1970s, general-equilibrium theory was being applied to practical problems through the numerical implementation of models calibrated to actual data, in what has become known as applied or computational general-equilibrium analysis (AGE, CGE). AGE is actually an umbrella term for a diverse family of related approaches, which we outline below. We focus most on the intellectual tradition of Herbert Scarf because his is distinct from other branches of AGE analysis as “the most direct link between [general-equilibrium] theoretical work and CGE modeling” (Peter Dixon and B.R. Parmenter 1996, 6). Scarf’s work took place in the context of post-war institutional collaborations between the Cowles Commission for Research in Economics, the RAND Corporation, Yale University, and Stanford University, as well as the shift in economics toward mathematical exposition. We consider how general-equilibrium theory became applied. Building on advances in applied mathematics and computing capabilities, Scarf’s algorithm allowed researchers to find an explicit numerical solution for a Walrasian general-equilibrium system, “a revolutionary advance that has helped shape policies affecting every American” (Glenn Hubbard in Sam Roberts 2015). The history of AGE analysis reveals how developments since the 1970s, including computerization, have profoundly shaped the economist’s approach to applied economics.

Expectations in Numerical General Equilibrium Models

Abstract The assumptions of myopia and of perfect foresight define polar cases concerning the availability of information about the future. In this paper we have developed a consistent general equilibrium model in which the amount of information available can be varied systematically within these extremes. We also report and interpret the results of simulations of various tax policies under different specifications as to the amount of foresight which consumers have. One of our main findings is that the social value of additional foresight can be negative: more foresight can lead to lower welfare. This occurs under policies like a consumption tax which lead to capital deepening and a declining price of capital over time. To the extent that consumers have more foresight, they become better able to anticipate these declines in capital prices and they lower their estimation of the rate of return to capital. Consequently, they save less and, given the existence of taxes on capital and the discrepancy between the social and private return to capital, the reduction in saving leads to lower welfare. We suggest that the welfare impact of additional foresight is fundamentally connected to the discrepancy between the social value of the last dollar of saving and consumption in a second-best world. We test this hypothesis by performing simulations in a counterfactual world in which the marginal values of saving and consumption are closer to equality. Results from these simulations support our hypothesis, as the welfare effects of changes in foresight are significantly smaller. The level of foresight attributed to consumers can affect significantly the welfare gain or loss afforded by alternative tax policies, although policy changes which produce welfare gains under the assumption of myopic behavior also show gains under perfect foresight. We find that the welfare gain from adopting a consumption tax is reduced from 5 to 10 percent when we move from myopia to a great deal of foresight.