| A generalized Harberger model is built for the Kenyan economy. The production side is represented by nine profit-maximizing industries as well as an investment and a foreign sector. The nine industries utilize intermediate inputs in a Leontief production function. The demand side is represented by ten consumer groups who are assumed to have a Cobb-Douglas utility function which they maximize subject to their income constraint. They derive income from selling factor endowments which they own prior to production, and, in case of the government, from tax revenue.; Data for the model come mainly from a 1976 Kenya social accounting matrix. The model is solved for equilibrium relative prices and activity levels by the Scarf-Merill algorithm. Apart from elasticities of substitution, the other production and demand parameters are estimated endogenously in order to calibrate the model to an equilibrium that replicates actual levels of production, demand and incomes in Kenya for 1976. This equilibrium serves as a benchmark for the comparative-static experiments in the dissertation.; Six counterfactual experiments are undertaken in which taxes, individually and together, are replaced by a uniform VAT of the GNP type and transfer payments abolished. The rate of the replacement tax is calculated "on the back of envelope". Among other results, the Kenyan system of taxes and voluntary group transfers is found to be progressive on incomes. |
