The paper provides an intuitive explanation – seen from an efficiency point of view – of the optimal commodity tax structure as the result of a trade-off between two objectives: 1) the objective of maintaining the first-best pattern of consumption of produced commodities, and 2) the objective of not discouraging the supply of labour. It supports this insight using a utility function with the explicit representation of the use of time, and using a functional form based on this utility function, which has sufficient flexibility not to predetermine the outcome of tax simulations, contrary to commonly employed functional forms which impose separability between consumption and leisure. The paper supplements the work of Atkinson and Stern (1980, 1981) by generalising the parameterised functional form they consider, and by pointing out the optimal tax implication of their analysis. It supplements the work by Sandmo (1990) and others by applying standard results to the analysis of optimal taxation with home production, facilitating the derivation of results and their interpretation, and thus helping to clarify certain conceptual ambiguities.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number
02-17.
Cited by: (explanations, 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.)