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A Generalization of the Atkinson-Stiglitz (1976) Theorem on the Undesirability of Nonuniform Excise Taxation

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  • Martin Hellwig

    ()
    (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

The Atkinson-Stiglitz (1976) theorem on the undesirability of nonuniform excise taxation when all agents have homogeneous, separable preferences is extended to allow for nonseparability with respect to endogenous variables that will be subject to distortions. The result is useful for analysing models with production and education. For such models, the conclusion of Bovenberg and Jacobs (2005), that it is desirable to distort production rather than education choices, is shown to be reversed if the hidden characteristic affects the cost of education rather than productivity.

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Bibliographic Info

Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2008_47.

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Date of creation: Dec 2008
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Handle: RePEc:mpg:wpaper:2008_47

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Keywords: Optimal Taxation; Atkinson-Stiglitz Theorem;

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References

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  1. Stéphane Gauthier & Guy Laroque, 2008. "Separability and public finance," IFS Working Papers W08/07, Institute for Fiscal Studies.
  2. 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.
  3. 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.
  4. J. A. Mirrlees, 1976. "Optimal Tax Theory: A Synthesis," Working papers 176, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Martin Hellwig, 2008. "A Note on Deaton's Theorem on the Undesirability of Nonuniform Excise Taxation," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_45, Max Planck Institute for Research on Collective Goods.
  6. A. Lans Bovenberg & Bas Jacobs, 2005. "Redistribution and Education Subsidies are Siamese Twins," Tinbergen Institute Discussion Papers 05-036/3, Tinbergen Institute.
  7. Martin Hellwig, 2008. "A Maximum Principle for Control Problems with Monotonicity Constraints," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_04, Max Planck Institute for Research on Collective Goods.
  8. Martin F. Hellwig, 2010. "Incentive Problems With Unidimensional Hidden Characteristics: A Unified Approach," Econometrica, Econometric Society, vol. 78(4), pages 1201-1237, 07.
  9. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
  10. A. Lans Bovenberg & Bas Jacobs, 2005. "Redistribution and Education Subsidies are Siamese Twins," Tinbergen Institute Discussion Papers 05-036/3, Tinbergen Institute.
  11. 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.
  12. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 263-82, April.
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Cited by:
  1. Gauthier, Stéphane & Laroque, Guy, 2009. "Separability and public finance," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1168-1174, December.

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