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Optimal Intervention in the Presence of "Categorical Equity" Objectives

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  • Gonzalez-Paramo, Jose M
  • Tang, De-Piao

Abstract

This paper derives rules for optimal intervention under "categorical equity" principles in a decentralized economy. The analysis suggests that in a "first best" world, a perfectly discriminatory system of excise taxes, the tax treatment of "categorical equity" goods should include a subsidy component of equal size for all agents in the economy, and indirect corrective measures might be desirable. Optimal tax formulae exhibit "separability" between vertical equity, externalities, and categorical equity.

Suggested Citation

  • Gonzalez-Paramo, Jose M & Tang, De-Piao, 1988. "Optimal Intervention in the Presence of "Categorical Equity" Objectives," Public Finance = Finances publiques, , vol. 43(1), pages 79-95.
    • Handle: RePEc:pfi:pubfin:v:43:y:1988:i:1:p:79-95
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