Introduction and Mission Statement

The Economics of STAMP

How STAMP works

The CGE Team

Deliverables

States that have applied STAMP

What the press is saying about STAMP

How STAMP works

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Read details of the model here in PDF format.

STAMP and LAMP are CGE (computable generalized equilibrium) models that account for and analyze the economic effects of tax policy changes. A CGE model is "computable" in the sense that it requires the solution of a system of nonlinear simultaneous equations for each policy simulation. It is "general" because it allows for the interdependence and interaction of all markets, their prices and their quantities. It is in "equilibrium" because supply is assumed to equal demand in each market.

This means that there are no "Keynesian" elements in the model. STAMP/LAMP is a market-clearing model. Tax policy changes are shown to affect economic activity through their effects on the prices of outputs and of the factors of production (labor and capital) that enter into those outputs.

In building the model, we first construct a "baseline" scenario in which we solve the model for five years into the future on the assumption that current tax law remains unchanged. This scenario provides the basis for an Excel spreadsheet, provided to the user, in which the user can enter hypothetical, alternative tax-law changes. The spreadsheet executes an order (received over the Internet by the BHI server) to re-solve the model for the indicated tax-law changes. The effects on the model's variables are then displayed on the spreadsheet. The user can use the spreadsheet on any computer that uses a recent version of Microsoft Windows and that has access to the Internet.

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• The model provides values of the following variables for both the baseline and the tax-change scenario:
• ·Gross State or Area product, by expenditure type ­ consumption, gross investment, government purchases and net exports to the rest of the world;
• ·Savings, by type;
• ·Aggregate income, by type (wages and capital income);
• ·Tax revenues and government expenditures, by type;
• ·Employment, by sector;
• ·Private capital stock, by sector;
• ·Net investment, by sector;
• ·Wages and capital income, by sector of origin;
• ·Intersectoral flows of final and intermediate goods.

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