Dixit's 1975 paper quot;Welfare Effects of Tax and Price Changesquot; constitutes a seminal contribution to the theory of tax reform within a second-best general equilibrium framework. The present paper clarifies ambiguities with respect to normalisation which has led to misinterpretation of...

Dixit's 1975 paper Welfare Effects of Tax and Price Changes constitutes a seminal contribution to the theory of tax reform analysis within a second-best general equilibrium framework. The present paper clarifies ambiguities with respect to normalisation which have led to misinterpretation of...