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Abstract
We solve for Australia’s optimal export tax on wool using a computable general
equilibrium model - an aggregated version of the Monash Model. A key aspect
of the analysis is the way in which we model short-run and long-run compara-
tive statics. As opposed to varying the Armington elasticity which measures the
degree of substitutability between domestic and imported goods, we contrast the
unrestricted movement of primary factors of production with a specific-factors
representation. We find that while results are virtually unchanged for the range
of Armington elasticity values we employ in our sensitivity analysis, the specific-
factors specification has a significant impact on model results.