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Are User Fees Really Regressive?

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  • George Economides
  • Apostolis Philippopoulos

Abstract

This paper studies the aggregate and distributional implications of introducing user fees for publicly provided excludable public goods into a model with consumption and income taxes. The setup is a neoclassical growth model where agents differ in earnings and second-best policy is chosen by a Ramsey government. Our main result is that the adoption of user fees by the Ramsey government not only increases aggregate efficiency, but it also decreases inequality. This result is in contrast to common view and policy practice.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-07/cesifo1_wp3875.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3875.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3875

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Related research

Keywords: user fees; Ramsey taxation; efficiency; inequality;

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References

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  1. Kurtis J. Swope & Eckhard Janeba, 2005. "Taxes or Fees? The Political Economy of Providing Excludable Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(3), pages 405-426, 08.
  2. Ingrid Ott & Stephen J. Turnovsky, 2005. "Excludable and Non-excludable Public Inputs: Consequences for Economic Growth," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 2, University of Lüneburg, Institute of Economics.
  3. Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Konstantinos Angelopoulos & James Malley & Apostolis Philippopoulos, 2011. "Time-consistent fiscal policy under heterogeneity: conflicting or common interests?," Working Papers, Bank of Greece 142, Bank of Greece.
  5. Krusell, Per, 2002. "Time-consistent redistribution," European Economic Review, Elsevier, Elsevier, vol. 46(4-5), pages 755-769, May.
  6. Park, Hyun & Philippopoulos, Apostolis, 2003. "On the dynamics of growth and fiscal policy with redistributive transfers," Journal of Public Economics, Elsevier, Elsevier, vol. 87(3-4), pages 515-538, March.
  7. Correia, Maria Isabel Horta, 2005. "Consumption Taxes and Redistribution," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5280, C.E.P.R. Discussion Papers.
  8. Kevin J. Lansing, 1998. "Optimal redistributive capital taxation in a neoclassical growth model," Working Papers in Applied Economic Theory, Federal Reserve Bank of San Francisco 99-01, Federal Reserve Bank of San Francisco.
  9. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, Econometric Society, vol. 54(3), pages 607-22, May.
  10. Clemens Fuest & Martin Kolmar, 2004. "A Theory of User-Fee Competition," CESifo Working Paper Series 1166, CESifo Group Munich.
  11. Hillman,Arye L., 2009. "Public Finance and Public Policy," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521738057.
  12. Gertler, Paul & Locay, Luis & Sanderson, Warren, 1987. "Are user fees regressive? : The welfare implications of health care financing proposals in Peru," Journal of Econometrics, Elsevier, Elsevier, vol. 36(1-2), pages 67-88.
  13. George Economides & Apostolis Philippopoulos, 2008. "Growth enhancing policy is the means to sustain the environment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 207-219, January.
  14. Angelopoulos, Konstantinos & Malley, James & Philippopoulos, Apostolis, 2011. "Time-consistent fiscal policy under heterogeneity: Conflicting or common interests?," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2011-41, Scottish Institute for Research in Economics (SIRE).
  15. N. Gregory Mankiw & Matthew Weinzierl & Danny Yagan, 2009. "Optimal Taxation in Theory and Practice," NBER Working Papers 15071, National Bureau of Economic Research, Inc.
  16. Bernd Huber & Marco Runkel, 2009. "Tax competition, excludable public goods, and user charges," International Tax and Public Finance, Springer, Springer, vol. 16(3), pages 321-336, June.
  17. Fraser, Clive D., 1996. "On the provision of excludable public goods," Journal of Public Economics, Elsevier, Elsevier, vol. 60(1), pages 111-130, April.
  18. Lars Ljungqvist & Thomas J. Sargent, 2004. "Recursive Macroeconomic Theory, 2nd Edition," MIT Press Books, The MIT Press, The MIT Press, edition 2, volume 1, number 026212274x, December.
  19. Jang-Ting Guo & Kevin J. Lansing, 1998. "Optimal taxation of capital income with imperfectly competitive product markets," Working Papers in Applied Economic Theory, Federal Reserve Bank of San Francisco 98-04, Federal Reserve Bank of San Francisco.
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