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Implementing optimal taxes using tradable share permits

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  • Berglann, Helge
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    Abstract

    This paper presents a simple system for efficient regulation under asymmetric information. Each firm's income is controlled by a tax that depends on the firm's own output and on a parameter construed as a share permit. These “shares of total expected output” lower a firm's tax burden and are acquired in a competitive market. By employing this scheme, the planner only requires knowledge of marginal damage to induce the first-best outcome. Relative to a traditional cap-and-trade approach the system increases expected social welfare.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

    Volume (Year): 64 (2012)
    Issue (Month): 3 ()
    Pages: 402-409

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    Handle: RePEc:eee:jeeman:v:64:y:2012:i:3:p:402-409

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    Web page: http://www.elsevier.com/locate/inca/622870

    Related research

    Keywords: Asymmetric information; Taxation; Tradable permits;

    References

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