Corrective Taxation of a Consumption Externality in the Presence of an Optimal Non-linear Income Tax
AbstractThis paper is concerned with the problem of combining a non-linear income tax with an indirect externality correcting tax. The analysis is performed in a model economy with two types of individuals and two types of consumption goods. The government wants to redistribute from the more able individuals to the less able, and also to correct for the externality arising from the total consumption of the dirty good. It turns out that the optimal tax structure depends on the complementarity or substitutability between the dirty good and leisure. The second-best externality correcting tax can be interpreted as consisting of a redistributive and an environmental component. Consequently, the dirt tax can be lower or higher than the first-best Pigouvian tax.
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Bibliographic InfoPaper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1997:14.
Length: 38 pages
Date of creation: 15 Jul 1997
Date of revision:
Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
More information through EDIRC
Pareto efficient taxation; environmental externalities; commodity tax; Nonlinear income tax;
Find related papers by JEL classification:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-08-31 (All new papers)
- NEP-ENV-1998-08-31 (Environmental Economics)
- NEP-MIC-1998-08-31 (Microeconomics)
- NEP-PBE-1998-08-31 (Public Economics)
- NEP-PUB-1998-08-31 (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.:
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"Environmental policy, public finance and the labour market in a second-best world,"
1992-43, Tilburg University, Center for Economic Research.
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"Environmental levies and distortionary taxation,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-152985, Tilburg University.
- Bovenberg, A Lans & de Mooij, Ruud A, 1997. "Environmental Levies and Distortionary Taxation: Reply," American Economic Review, American Economic Association, vol. 87(1), pages 252-53, March.
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