In the design of the optimal direct/indirect tax mix, the canonical view was laid by Atkinson and Stiglitz (1976) who showed that commodity taxes are unnecessary in an economy in which there is an optimal nonlinear income tax provided that commodities are separable from labor in the utility functions of all taxpayers, that the aggregators over these commodities are ordinally equivalent and that wages are fixed. When wages are endogenous, Naito (1999) showed that this result may not hold and in addition that production efficiency may not be Pareto optimal. Given an optimal nonlinear income tax, we show that production inefficiency is Pareto optimal if the aggregate technology set is strictly concave. The Atkinson-Stiglitz condition is neither necessary nor sufficient for zero commodity taxation and commodity taxes are part of almost all Pareto optima. Copyright 2004 Blackwell Publishing Inc..
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)