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Separability and public finance

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  • Stéphane Gauthier
  • Guy Laroque

    ()
    (Institute for Fiscal Studies and University College London)

Abstract

In a second best environment, the optimal policy choice sometimes follows the first best rules. This note lays down the information structure and separability assumptions under which this property holds in a variety of setups.

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File URL: http://www.ifs.org.uk/wps/wp0807.pdf
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Bibliographic Info

Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W08/07.

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Length: 18 pp.
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:ifs:ifsewp:08/07

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Related research

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

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References

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  1. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 1998. "Externalities and optimal taxation," Journal of Public Economics, Elsevier, vol. 70(3), pages 343-364, December.
  2. Sandmo, Agnar, 1998. "Redistribution and the marginal cost of public funds," Journal of Public Economics, Elsevier, vol. 70(3), pages 365-382, December.
  3. Bovenberg, A.L. & Jacobs, B., 2001. "Redistribution and Education Subsidies are Siamese Twins," Discussion Paper 2001-82, Tilburg University, Center for Economic Research.
  4. Robin Boadway & Michael Keen, 1991. "Public Goods, Self-Selection and Optimal Income Taxation," Working Papers 828, Queen's University, Department of Economics.
  5. Hellwig, Martin F., 2007. "A contribution to the theory of optimal utilitarian income taxation," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1449-1477, August.
  6. Laroque, Guy R., 2005. "Indirect taxation is superfluous under separability and taste homogeneity: a simple proof," Economics Letters, Elsevier, vol. 87(1), pages 141-144, April.
  7. Kaplow, Louis, 2006. "On the undesirability of commodity taxation even when income taxation is not optimal," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1235-1250, August.
  8. Nava, Mario & Schroyen, Fred & Marchand, Maurice, 1996. "Optimal fiscal and public expenditure policy in a two-class economy," Journal of Public Economics, Elsevier, vol. 61(1), pages 119-137, July.
  9. Christiansen, Vidar, 1981. "Evaluation of Public Projects under Optimal Taxation," Review of Economic Studies, Wiley Blackwell, vol. 48(3), pages 447-57, July.
  10. Martin Hellwig, 2008. "A Generalization of the Atkinson-Stiglitz (1976) Theorem on the Undesirability of Nonuniform Excise Taxation," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_47, Max Planck Institute for Research on Collective Goods.
  11. Louis Kaplow, 2004. "On the (Ir)Relevance of Distribution and Labor Supply Distortion to Government Policy," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 159-175, Fall.
  12. 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, vol. 71(2), pages 165-188, February.
  13. Kaplow Louis, 2008. "Optimal Policy with Heterogeneous Preferences," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-30, September.
  14. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
  15. A. Lans Bovenberg & Bas Jacobs, 2005. "Redistribution and Education Subsidies are Siamese Twins," Tinbergen Institute Discussion Papers 05-036/3, Tinbergen Institute.
  16. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  17. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  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. Joel Slemrod & Shlomo Yitzhaki, 2001. "Integrating Expenditure and Tax Decisions: The Marginal Cost of Funds and the Marginal Benefit of Projects," NBER Working Papers 8196, National Bureau of Economic Research, Inc.
  20. Louis Kaplow, 2008. "Optimal Policy with Heterogeneous Preferences," NBER Working Papers 14170, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. 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.
  2. Claus Thustrup Kreiner & Nicolaj Verdelin, 2009. "Optimal Provision of Public Goods: A Synthesis," CESifo Working Paper Series 2538, CESifo Group Munich.
  3. 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.
  4. Hellwig, Martin F., 2010. "A generalization of the Atkinson-Stiglitz (1976) theorem on the undesirability of nonuniform excise taxation," Economics Letters, Elsevier, vol. 108(2), pages 156-158, August.
  5. Bas Jacobs, 2010. "The Marginal Cost of Public Funds is One," CESifo Working Paper Series 3250, CESifo Group Munich.
  6. Antoine d'Autume & Katheline Schubert & Cees Withagen, 2011. "Should the carbon price be the same in all countries?," Documents de travail du Centre d'Economie de la Sorbonne 11076, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  7. X. Ruiz del Portal, 2012. "On the Direct Versus Indirect Taxation Controversy," Hacienda Pública Española, 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 2011_17, Max Planck Institute for Research on Collective Goods, revised Jun 2013.
  9. CALTHROP, Edward & DE BORGER, Bruno & PROOST, Stef, 2008. "Cost-benefit analysis of transport investments in distorted economies," Working Papers 2008011, University of Antwerp, Faculty of Applied Economics.
  10. repec:hal:journl:halshs-00654239 is not listed on IDEAS

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