Rules of Normalisation and their Importance for Interpretation of Systems of Optimal Taxation
AbstractThe adoption of proper rules of normalisation is in general considered a trivial problem which deserves little attention. Possibly for that very reason errors in normalisation have resulted in flawed interpretations of the conditions for optimal commodity taxation. We state based on an explicit representation of the general equilibrium conditions the rules of normalisation in standard optimal tax models. This allows us to provide an intuitive explanation of what determines the optimal tax system. Finally, we review a number of examples where lack of precision with respect to normalisation in otherwise important contributions to the literature on optimal taxation has given rise to misinterpretations of of analytical results.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2006-13.
Date of creation: 30 Dec 2006
Date of revision:
Contact details of provider:
Web page: http://www.econ.au.dk/afn/
Public economics; optimal taxation; normalisation rules; p-complements; q-complements; distance function;
Find related papers by JEL classification:
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-10 (All new papers)
- NEP-PBE-2007-02-10 (Public Economics)
- NEP-PUB-2007-02-10 (Public Finance)
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.:
- Jakob Roland Munch & Michael Rosholm & Michael Svarer, 2006.
"Home Ownership, Job Duration, and Wages,"
CAM Working Papers
2006-08, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
- Munch, Jakob R. & Rosholm, Michael & Svarer, Michael, 2006. "Home Ownership, Job Duration and Wages," IZA Discussion Papers 2110, Institute for the Study of Labor (IZA).
- Jakob Roland Munch & Michael Rosholm & Michael Svarer, 2006. "Home Ownership, Job Duration, and Wages," Economics Working Papers 2006-06, School of Economics and Management, University of Aarhus.
- Francesco Busato & Enrico Marchetti, 2009.
"Skills, sunspots and cycles,"
Journal of Economics,
Springer, vol. 97(3), pages 189-215, July.
- Borger, Bruno De, 2011. "Optimal congestion taxes in a time allocation model," Transportation Research Part B: Methodological, Elsevier, vol. 45(1), pages 79-95, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.