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Electric vehicle (EV) subsidies are costly and ineffective policy mechanisms in the battle against greenhouse gases. Furthermore, their operation is not well understood given the new regulatory environment governing emissions standards and fuel efficiency that is common to the United States and Canada. Given these standards, the sale of more EVs permits manufacturers to sell fossil fuel vehicles with higher carbon dioxide (CO2) emissions. Paradoxically, more EV sales result in more CO2 emissions. I explore possible rationales for subsidies, but none is easily validated. Consequently, the case for traditional externality-correcting policies such as carbon taxation that approximate "first-best" solutions is compelling.

The objective of this paper is to examine the effect of inflation on the quantity of housing demanded where mortgage interest payments are tax deductable and where capital markets set a limit upon the amount which can be borrowed to purchase a house. It is illustrated theoretically that the answer to this question depends upon the potential housebuyer's marginal tax rate. A micro simulation model is then constructed to examine the likely numerical effects on demand of different rates of inflation. The results indicate that demand, on the part of a typical potential buyer, should increase in response to a lowering of the inflation rate. The simulation model also indicates that the real value of lax savings increase in response to a lower inflation rate. These conclusions differ substantially from what would be obtained in other economies whose tax laws are similar in intent. The difference is attributable to the ceiling on tax deductible interest payments in Ireland. A subsidiary objective of the paper is to examine the tax cost of current government measures designed to encourage house purchase. It is illustrated that the tax rate at which households may deduct interest payments could be reduced with only a minor effect on housing demand.

We explore the tax revenue consequences of legalizing recreational cannabis in Canada. We build, calibrate, and simulate a two-level nested demand model in which legal and illegal cannabis are differentiated products and that incorporates econometric estimates of critical parameters. First, we find that sales tax and excise tax revenues accruing from legalization may be fully offset by declines in revenues from alcohol and tobacco. Second, and in contrast to excise and sales tax revenue, new revenue will accrue from personal income and corporate profits taxes. Using some available information on the wage structure of cannabis-producing corporations and imposing a Pareto distribution on incomes within the industry, we obtain an estimate of personal income tax revenues. To compute corporate profits tax revenue, we use priors on labour and capital shares and simulate the results of assumptions of debt leverage. We also estimate the private dollar value of legalization to individuals using a utility function approach. Per user, our results suggest a value roughly equal to $500 per annum. The results of this study may carry over to high-sin-tax economies contemplating legalization.

Microeconomics: Markets, Methods and Models provides a concise, yet complete, coverage of introductory microeconomic theory, application and policy in a Canadian and global environment. Our beginning is orthodox: we explain and develop the standard tools of analysis in the discipline. Economic policy is about the well-being of the economy's participants, and economic theory should inform economic policy. So we investigate the meaning of "well-being" in the context of an efficient use of the economy's resources early in the text. We next develop an understanding of individual optimizing behaviour. This behaviour in turn is used to link household decisions on savings with firms' decisions on production, expansion and investment. A natural progression is to explain production and cost structures. From the individual level of household and firm decision making, the text then explores behaviour in a variety of different market structures.Markets for the inputs in the productive process — capital and labour — are a natural component of firm-level decisions. But education and human capital are omnipresent concepts and concerns in the modern economy, so we devote a complete chapter to them. The book then examines the role of a major and important non-market player in the economy — the government, and progresses to develop the key elements in the modern theory of international trade.Opportunity cost, a global economy and behavioural responses to incentives are the dominant themes.

AbstractThis paper examines the impact of tobacco excise taxes where legal and illegal supplies coexist. The government's objective is to minimize cigarettes smoked in the economy (or to maximize revenue or to minimize illegal activity). It reacts to a competitive illegal supply in an adjoining jurisdiction. A model of consumer choice is used to demonstrate how demand response to tax changes can yield counterintuitive results. While the model mimics the Canadian market, similar situations characterize the US and European markets. A novel element of the paper is the treatment of externalities on the supply side rather than the demand side.