A Linear Multi-Sector Equilibrium Model with Taxation

This paper presents a linear multi-sector equilibrium model with taxation, which includes two types of consumers (i.e. laborers and capitalists). In the model capitalists exploit laborers by levying taxes. Hence, the issues of the income distribution between laborers and capitalists can be studied in the form of tax issues. This model covers the two types of simple reproduction models as its special cases, that is, the simple reproduction model wherein agents exchange commodities by labor values (i.e. the surplus value model), and the simple reproduction model wherein agents exchange commodities by production prices (i.e. the profit-price model). Hence this is a more general framework for the analyzing of the simple reproduction. After the development of the model, the effects of levying the wage tax, value-added tax and the turnover tax are discussed. And the possible efficiency loss of levying the turnover tax is also illustrated.