On Atmosphere Externality and Corrective Taxes
AbstractIt has been argued that in the presence of an ’Atmosphere Externality’ and competitive behavior by households, a uniform commodity tax on the externality - generating good attains the first best. It is demonstrated, however, that if income redistribution is desirable then personalized taxes are required for a second-best optimum. Each of these taxes is the sum of a uniform (across households) tax and a component, positive or negative, which depends on the household’s income and demand elasticities. Second-best optimal indirect taxes and rules for investment in externality-reducing measures are also considered.
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Bibliographic InfoPaper provided by The Center for the Study of Rationality, Hebrew University, Jerusalem in its series Discussion Paper Series with number dp328.
Length: 12 pages
Date of creation: Feb 2002
Date of revision:
atmosphere externality; optimal taxation; disributional considerations;
Other versions of this item:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-MIC-2003-07-13 (Microeconomics)
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