Leontief's “Environmental Repercussions and the Economic Structure…” Revisited: A General Equilibrium Formulation

Abstract

A 1972 paper by Leontief on an input‐output model with pollution removal activity as an explicit sector is reformulated as a computable general equilibrium model. The advantage of this reformulation is that substitution and rational behavior by producers and consumers can be modeled and prices are rendered endogenous. The two approaches are contrasted regarding the consequences of policy changes about taxation and technological improvements.