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Pigouvian Taxation with Administrative Costs

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  • A. Mitchell Polinsky
  • Steven Shavell

Abstract

This paper examines how the optimal Pigouvian tax should be adjusted to reflect administrative costs. Several cases are examined, depending on whether the administrative costs are fixed per firm taxed or are a function of the amount of tax collected, and on whether such costs are borne by the government or by the taxed firm. In some cases, the presence of administrative costs increases the optimal tax above the external cost, while in other cases it leads to a decrease in the tax.

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File URL: http://www.nber.org/papers/w0742.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0742.

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Date of creation: Sep 1981
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Publication status: published as Polinsky, A. Mitchell and Shavell, Steven. "Pigouvian Taxation with Administrative Costs." Journal of Public Economics, Vol. 19, No. 3 (December 1982) , pp. 385-394.
Handle: RePEc:nbr:nberwo:0742

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  1. Heller, Walter P & Shell, Karl, 1974. "On Optimal Taxation with Costly Administration," American Economic Review, American Economic Association, vol. 64(2), pages 338-45, May.
  2. Yitzhaki, Shlomo, 1979. "A Note on Optimal Taxation and Administrative Costs," American Economic Review, American Economic Association, vol. 69(3), pages 475-80, June.
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Cited by:
  1. Gilbert Metcalf & David Weisbach, 2008. "The Design of a Carbon Tax," Discussion Papers Series, Department of Economics, Tufts University 0728, Department of Economics, Tufts University.
  2. John Stranlund & Carlos Chávez, 2013. "Who should bear the administrative costs of an emissions tax?," Journal of Regulatory Economics, Springer, vol. 44(1), pages 53-79, August.
  3. Sjak Smulders & Herman R.J. Vollebergh, 1999. "Green Taxes and Administrative Costs: The Case of Carbon Taxation," NBER Working Papers 7298, National Bureau of Economic Research, Inc.
  4. Jon Harford, 1998. "Pollution and the firm Robert E. Kohn Edward Elgar, 1998, 251 pp," Atlantic Economic Journal, International Atlantic Economic Society, vol. 26(3), pages 317-324, September.
  5. Kampas, Athanasios, 2001. "Identifying Common Fallacies in the Choice of Environmental Taxes for Agricultural Pollution Control: The Absence of Transaction Costs and the Normality of Agricultural Pollutants," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 2(2), August.
  6. Don Fullerton & Andrew Leicester & Stephen Smith, 2008. "Environmental Taxes," NBER Working Papers 14197, National Bureau of Economic Research, Inc.
  7. Chung-Huang Huang, 1996. "Effectiveness of environmental regulations under imperfect enforcement and the firm's avoidance behavior," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 8(2), pages 183-204, September.
  8. Herath, Deepananda P.B. & Weersink, Alfons, 1999. "Transaction Costs, Economic Instruments And Environmental Policies," 1999 Annual meeting, August 8-11, Nashville, TN 21588, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Raphael Calel, 2011. "Climate change and carbon markets: a panoramic history," LSE Research Online Documents on Economics 37397, London School of Economics and Political Science, LSE Library.
  10. A. Mitchell Polinsky & Steven Shavell, 1990. "Enforcement Costs and the Optimal Magnitude and Probability of Fines," NBER Working Papers 3429, National Bureau of Economic Research, Inc.
  11. Rajeev Goel & Edward Hsieh, 1997. "Market structure, pigouvian taxation, and welfare," Atlantic Economic Journal, International Atlantic Economic Society, vol. 25(2), pages 128-138, June.
  12. Raphael Calel, 2011. "Climate change and carbon markets: a panoramic history," Grantham Research Institute on Climate Change and the Environment Working Papers 52, Grantham Research Institute on Climate Change and the Environment.
  13. Athanasios Kampas & Ben White, 2004. "Administrative Costs and Instrument Choice for Stochastic Non-point Source Pollutants," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 27(2), pages 109-133, February.

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