This paper, authored by John B. Shoven and John Whalley, discusses the development and application of applied general equilibrium models in the fields of taxation and international trade. The authors highlight the importance of these models in bridging the gap between academic theory and policy-making by providing numerical estimates of policy impacts. The paper begins with an introduction that outlines the challenges in translating economic theory into practical policy analysis and the role of applied general equilibrium models in addressing these challenges. It then delves into the methodology of applied general equilibrium analysis, explaining the basic framework, including production and demand functions, and the solution methods used to find equilibrium solutions. The authors provide a detailed numerical example to illustrate how these models can be used to analyze policy changes, such as a tax on capital in a manufacturing sector. They demonstrate how the model can be used to compute equilibrium prices, production levels, and factor employments, and how these changes can be compared to the benchmark equilibrium to assess welfare impacts. The paper also reviews several applied models in tax and trade policy, highlighting their key features and policy implications. The authors discuss the process of parameter selection, calibration, and model solving, emphasizing the importance of data accuracy and the choice of functional forms. They address the limitations of current methods, such as the lack of uniqueness in some models and the complexity of incorporating dynamic features. The paper concludes with a discussion of future directions for research, emphasizing the need for more realistic data and improved parameter specification to enhance the policy relevance of these models.This paper, authored by John B. Shoven and John Whalley, discusses the development and application of applied general equilibrium models in the fields of taxation and international trade. The authors highlight the importance of these models in bridging the gap between academic theory and policy-making by providing numerical estimates of policy impacts. The paper begins with an introduction that outlines the challenges in translating economic theory into practical policy analysis and the role of applied general equilibrium models in addressing these challenges. It then delves into the methodology of applied general equilibrium analysis, explaining the basic framework, including production and demand functions, and the solution methods used to find equilibrium solutions. The authors provide a detailed numerical example to illustrate how these models can be used to analyze policy changes, such as a tax on capital in a manufacturing sector. They demonstrate how the model can be used to compute equilibrium prices, production levels, and factor employments, and how these changes can be compared to the benchmark equilibrium to assess welfare impacts. The paper also reviews several applied models in tax and trade policy, highlighting their key features and policy implications. The authors discuss the process of parameter selection, calibration, and model solving, emphasizing the importance of data accuracy and the choice of functional forms. They address the limitations of current methods, such as the lack of uniqueness in some models and the complexity of incorporating dynamic features. The paper concludes with a discussion of future directions for research, emphasizing the need for more realistic data and improved parameter specification to enhance the policy relevance of these models.