Description
observedWedge = firstMarginalRate-secondMarginalRate; unexplainedWedge subtracts suppliedTaxWedge.
Policy wedges and boundary checks depend on supplied tax, subsidy and floor conventions. A local difference or triangle approximation can describe the stated model without establishing the actual rule, incidence or full welfare effect.
observedWedge = firstMarginalRate-secondMarginalRate; unexplainedWedge subtracts suppliedTaxWedge.
When to use this tool
Use Marginal Rate Wedge when checking a supplied economic-policy contribution or comparison.
How to use the tool and how it works
- Enter firstMarginalRate, secondMarginalRate, suppliedTaxWedge. Use the units and conventions below.
- Run the tool. Correct any format, range, or cross-field input error before interpreting the output.
- Read observedWedge, unexplainedWedge. Use the output convention below.
observedWedge = firstMarginalRate-secondMarginalRate; unexplainedWedge subtracts suppliedTaxWedge.1
| Input field | Meaning and units | Accepted input |
|---|---|---|
| firstMarginalRate | First Marginal Rate | Required. Finite number. |
| secondMarginalRate | Second Marginal Rate | Required. Finite number. |
| suppliedTaxWedge | Supplied Tax Wedge | Required. Finite number. |
| Output field | Interpretation | Returned shape |
|---|---|---|
| observedWedge | Observed Wedge | Required. Finite number. |
| unexplainedWedge | Unexplained Wedge | Required. Finite number. |
{
"input": {
"firstMarginalRate": 3,
"secondMarginalRate": 2,
"suppliedTaxWedge": 0.5
},
"output": {
"observedWedge": 1,
"unexplainedWedge": 0.5
}
}Limitations and assumptions
- All marginal rates and wedges must use the same units and sign convention. The residual does not identify a causal tax effect, inefficiency or an omitted policy.
- Inputs must satisfy both the field types and the cross-field conditions above. Invalid input causes an error; a successful false flag or documented placeholder is a different result.
- Numeric calculations use binary floating point unless exact decimal-integer arithmetic is explicitly stated. No hidden measurement tolerance or decimal rounding is added; nonfinite or out-of-contract results are rejected. Numeric signed-zero results are exported as zero.
Alternative or Complementary methods
Consult the actual policy and a suitable complete equilibrium and welfare analysis before interpreting a local term as a policy outcome.
References
Similar or alternative tools
- Net Tax Budget Line Slope
Return both net prices and slope = -firstNetPrice/secondNetPrice.
- Deadweight Loss Triangle Small Tax
loss = taxPerUnit*quantityReduction/2, in currency when the quantity basis matches.