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Separability and public finance

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Author Info

  • Stéphane Gauthier

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)

  • Guy Laroque

    (IFS - Laboratory of the Institute for Fiscal Studies - Institute for Fiscal Studies, Department of Economics - University College London)

Abstract

In a second best environment, the optimal policy choice sometimes follows first best rules, as described in a number of scattered works. This paper presents a formal general argument which allows to unify much of the literature. It lays down the information structure and separability assumptions under which the results hold in a variety of setups, with extensions to preference heterogeneity and individual production sets

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number hal-00731132.

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Date of creation: Dec 2009
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Publication status: Published, Journal of Public Economics, 2009, 93, 11-12, 1168-1174
Handle: RePEc:hal:journl:hal-00731132

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00731132
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Related research

Keywords: separability; second best optimality; indirect taxes; Samuelson rule; Pigovian taxation; individual production;

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References

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  1. Louis Kaplow, 2008. "Optimal Policy with Heterogeneous Preferences," NBER Working Papers 14170, National Bureau of Economic Research, Inc.
  2. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  3. Louis Kaplow, 2004. "On the Undesirability of Commodity Taxation Even When Income Taxation is Not Optimal," NBER Working Papers 10407, National Bureau of Economic Research, Inc.
  4. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195102680, October.
  5. repec:dgr:uvatin:2005036 is not listed on IDEAS
  6. Louis Kaplow, 2004. "On the (Ir)Relevance of Distribution and Labor Supply Distortion to Government Policy," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 18(4), pages 159-175, Fall.
  7. Christiansen, Vidar, 1981. "Evaluation of Public Projects under Optimal Taxation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 48(3), pages 447-57, July.
  8. Martin Hellwig, 2007. "A Contribution to the Theory of Optimal Utilitarian Income Taxation," Working Paper Series of the Max Planck Institute for Research on Collective Goods, Max Planck Institute for Research on Collective Goods 2007_2, Max Planck Institute for Research on Collective Goods.
  9. Slemrod, Joel & Yitzhaki, Shlomo, 2001. "Integrating Expenditure and Tax Decisions: The Marginal Cost of Funds and the Marginal Benefit of Projects," National Tax Journal, National Tax Association, vol. 54(n. 2), pages 189-202, June.
  10. Bovenberg, A Lans & Jacobs, Bas, 2001. "Redistribution and Education Subsidies are Siamese Twins," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3099, C.E.P.R. Discussion Papers.
  11. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, Elsevier, vol. 6(1-2), pages 55-75.
  12. Sandmo, Agnar, 1998. "Redistribution and the marginal cost of public funds," Journal of Public Economics, Elsevier, Elsevier, vol. 70(3), pages 365-382, December.
  13. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 1998. "Externalities and optimal taxation," Journal of Public Economics, Elsevier, Elsevier, vol. 70(3), pages 343-364, December.
  14. Robin Boadway & Michael Keen, 1991. "Public Goods, Self-Selection and Optimal Income Taxation," Working Papers, Queen's University, Department of Economics 828, Queen's University, Department of Economics.
  15. Nava, Mario & Schroyen, Fred & Marchand, Maurice, 1996. "Optimal fiscal and public expenditure policy in a two-class economy," Journal of Public Economics, Elsevier, Elsevier, vol. 61(1), pages 119-137, July.
  16. Hellwig, Martin F., 2010. "A generalization of the Atkinson-Stiglitz (1976) theorem on the undesirability of nonuniform excise taxation," Economics Letters, Elsevier, Elsevier, vol. 108(2), pages 156-158, August.
  17. Guy Laroque, 2004. "Indirect Taxation is Superfluous under Separability and Taste Homogeneity : A Simple Proof," Working Papers, Centre de Recherche en Economie et Statistique 2004-23, Centre de Recherche en Economie et Statistique.
  18. Louis Kaplow, 2006. "Optimal Control of Externalities in the Presence of Income Taxation," NBER Working Papers 12339, National Bureau of Economic Research, Inc.
  19. Kaplow Louis, 2008. "Optimal Policy with Heterogeneous Preferences," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 8(1), pages 1-30, September.
  20. Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, Elsevier, vol. 71(2), pages 165-188, February.
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Cited by:
  1. Edward Calthrop & Bruno De Borger & Stef Proost, 2008. "Cost-benefit analysis of transport investments in distorted economies," Center for Economic Studies - Discussion papers, Katholieke Universiteit Leuven, Centrum voor Economische Studiën ces0818, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  2. Claus Thustrup Kreiner & Nicolaj Verdelin, 2008. "Optimal Provision of Public Goods: A Synthesis," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 08-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  3. Aigner, Rafael, 2013. "Environmental Taxation and Redistribution Concerns," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79859, Verein für Socialpolitik / German Economic Association.
  4. Bas Jacobs & Ruud A. de Mooij, 2011. "Pigou Meets Mirrlees: On the Irrelevance of Tax Distortions for the Second-Best Pigouvian Tax," CESifo Working Paper Series 3342, CESifo Group Munich.
  5. repec:hal:journl:halshs-00654239 is not listed on IDEAS
  6. Bas Jacobs, 2010. "The Marginal Cost of Public Funds is One," CESifo Working Paper Series 3250, CESifo Group Munich.
  7. X. Ruiz del Portal, 2012. "On the Direct Versus Indirect Taxation Controversy," Hacienda Pública Española, IEF, IEF, vol. 203(4), pages 9-22, December.
  8. Rafael Aigner, 2011. "Environmental Taxation and Redistribution Concerns," Working Paper Series of the Max Planck Institute for Research on Collective Goods, Max Planck Institute for Research on Collective Goods 2011_17, Max Planck Institute for Research on Collective Goods, revised Jun 2013.
  9. Hellwig, Martin F., 2010. "A generalization of the Atkinson-Stiglitz (1976) theorem on the undesirability of nonuniform excise taxation," Economics Letters, Elsevier, Elsevier, vol. 108(2), pages 156-158, August.
  10. Antoine D'Autume & Katheline Schubert & Cees Withagen, 2011. "Should the carbon price be the same in all countries ?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00654239, HAL.

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