A Diagrammatic Approach to Optimal Commodity Taxation
This paper presents a diagrammatic analysis of the Ramsey tax problem with the aim of making the theory easier to understand. In particular, it provides an intuitive justification for the Ramsey tax rule, something that has so far been missing from the literature. The analysis rests on the idea that commodity taxes can be improved if there is scope for inducing consumers to participate further in taxed activities. The Ramsey rule is shown to be satisfied when no such scope exists.
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Volume (Year): 42 (1987)
Issue (Month): 2 ()
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