Political Economy of Intermediate Goods Taxation
AbstractWe generalize the Diamond-Mirrlees production efficiency theorem, that there should be no taxes on sectors producing pure intermediate goods, to an environment with political economy constraints. In our economy, allocations and taxation are decided by self-interested politicians without the power to commit to future policies. The Diamond-Mirrlees production efficiency result holds even when political economy constraints introduce distortions on labor supply and capital accumulation. (JEL: H11, H21, E61, P16) (c) 2008 by the European Economic Association.
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Bibliographic InfoArticle provided by MIT Press in its journal Journal of the European Economic Association.
Volume (Year): 6 (2008)
Issue (Month): 2-3 (04-05)
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Web page: http://www.mitpressjournals.org/jeea
Find related papers by JEL classification:
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
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