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Externality-correcting taxes and regulation

Author

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  • Vidar Christiansen

    (Institute for Fiscal Studies)

  • Stephen Smith

    (Institute for Fiscal Studies and University College London)

Abstract

Much of the literature on externalities has considered taxes and direct regulation as alternative policy instruments. Both instruments may in practice be imperfect, reflecting informational deficiencies and other limitations. We analyse the use of taxes and regulation in combination, to control externalities arising from individual consumption behaviour. We consider cases where taxes are either imperfectly differentiated to reflect individual differences in externalities, or where some consumption escapes taxation. In both cases we characterise the optimal instrument mix, and show how changing the level of direct regulation alters the optimal externality tax.

Suggested Citation

  • Vidar Christiansen & Stephen Smith, 2009. "Externality-correcting taxes and regulation," IFS Working Papers W09/16, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:09/16
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    References listed on IDEAS

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    9. Vidar Christiansen & Stephen Smith, 2009. "Externality-correcting Taxes and Regulation," CESifo Working Paper Series 2793, CESifo.
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    Cited by:

    1. Vidar Christiansen & Stephen Smith, 2009. "Externality-correcting Taxes and Regulation," CESifo Working Paper Series 2793, CESifo.
    2. Richard M. Bird & Sally Wallace, 2010. "Taxing Alcohol In Africa: Reflections And Updates," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1031, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Bird,Richard M., 2015. "Tobacco and alcohol excise taxes for improving public health and revenue outcomes : marrying sin and virtue ?," Policy Research Working Paper Series 7500, The World Bank.
    4. Rebecca L. Taylor & Sofia B. Villas-Boas, 2016. "Bans vs. Fees: Disposable Carryout Bag Policies and Bag Usage," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(2), pages 351-372.
    5. Markus Haavio & Kaisa Kotakorpi, 2012. "Sin Licenses Revisited," CESifo Working Paper Series 4010, CESifo.
    6. Sijbren Cnossen, 2020. "Excise Taxation for Domestic Resource Mobilization," CESifo Working Paper Series 8442, CESifo.
    7. Vidar Christiansen & Stephen Smith, 2015. "Emissions Taxes and Abatement Regulation Under Uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 17-35, January.
    8. Mr. Michael Keen, 2011. "The Taxation and Regulation of Banks," IMF Working Papers 2011/206, International Monetary Fund.
    9. Taylor, Rebecca & Villas-Boas, Sofia B., 2015. "Bans versus Fees: Disposable Carryout Bag Policies and Bag Usage," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 204783, Agricultural and Applied Economics Association.
    10. Shackelford, Douglas A. & Shaviro, Daniel N. & Slemrod, Joel, 2010. "Taxation and the Financial Sector," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(4), pages 781-806, December.

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    More about this item

    Keywords

    externalities; Pigouvian taxes; regulations;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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