The market in ancient Greece should be understood as a specific institutional construct, that of the city-state, which allowed its citizens to exercise private property rights guaranteed by law. By extension, free foreigners were also acknowledged these rights, which however extended to the private ownership of human beings (slavery). The city-state also created the conditions for an unusually high division of labour. Each city was a market space of its own, with its own rules and logic, which could include the control over sales margins and even sometimes the establishment of maximum prices for some perishable fresh goods. The network of hundreds of Greek city-states also created the conditions for the development of an original form of international market.

This chapter examines the treatment of trade and domestic taxes in a computable general equilibrium (CGE) model. Trade taxes are imposed on imports and exports of goods and services. Domestic taxes are taxes paid by production activities on output and factor use and by purchasers on sales of intermediate and retail goods, and income taxes. We trace the tax data in a Social Accounting Matrix (SAM) to describe the agent and the economic activity on which the tax is levied and the amount of revenue generated by each tax; we also show how to use the SAM’s data to calculate tax rates. Partial equilibrium diagrams then illustrate the theoretical effects of taxes on economic activity and welfare. The results of tax policy experiments using a CGE model support the theoretical predictions and offer insight into the economywide effects of each tax. Three applied examples of tax policy analysis explore the second-best welfare effects of a tax, the marginal welfare impacts of a country’s entire tax structure, and the elimination of import tariffs in a preferential trade agreement.