A note on optimal taxation in the presence of externalities
AbstractIn this paper, we reexamine the optimal tax problem with identical consumers in the presence of externalities by taking explicitly the interrelationship between externality and consumption into account. In setting out the optimal tax conditions in the presence of externalities, it is standard to follow Sandmo (1975) to employ the following assumptions: (i) separable externalities; and (ii) independent demands. We dispense with these restrictive assumptions and show the Sandmo’s “additivity property” where externalities only affect the tax formula for an externality generating good and do not affect other tax formulas.
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Bibliographic InfoPaper provided by Otaru University of Commerce in its series ビジネス創造センターディスカッション・ペーパー (Discussion papers of the Center for Business Creation) with number 10252/956.
Length: 7 pages
Date of creation: 16 Feb 2005
Date of revision:
Publication status: Published in Discussion paper series (2005), 99: 1-7
Optimal taxation; Externalities; Separability; Demand independence; Interrelationship;
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"Environmental Levies and Distortionary Taxation,"
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