IDEAS home Printed from https://ideas.repec.org/p/ags/uwarer/271292.html

Constraints on Income Distribution and Production Efficiency In Economies with Ramsey Taxation

Author

Listed:
  • Blackorby, Charles
  • Murty, Sushama

Abstract

We study the link between second-best production efficiency and the constraints on income distribution imposed by private ownership of firms in economies with Ramsey taxation. We review the result of Dasgupta and Stiglitz [1972], Mirrlees [1972], Hahn [1973], and Sadka [1977] about firm-specific profit taxation leading to second-best production effi- ciency. Problems in the proofs of this result in these papers have been identified by Reinhorn [2005]. We provide an alternative, and with some hope a more intuitive, proof of this result. The mechanism employed in our proof is also used to show second-best production efficiency under some configuarations of private ownership without any (or at best, uniform) profit taxation. The results obtained raise questions about the genericity of the phenomenon of second-best production inefficiency and about recovering social shadow prices in such economies.

Suggested Citation

  • Blackorby, Charles & Murty, Sushama, 2009. "Constraints on Income Distribution and Production Efficiency In Economies with Ramsey Taxation," Economic Research Papers 271292, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:271292
    DOI: 10.22004/ag.econ.271292
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/271292/files/twerp_908.pdf
    Download Restriction: no
    File URL: https://ageconsearch.umn.edu/record/271292/files/twerp_908.pdf?subformat=pdfa
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.271292?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Reinhorn, Leslie J., 2013. "Production efficiency and excess supply," Mathematical Social Sciences, Elsevier, vol. 65(2), pages 92-100.
    2. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    3. Partha Dasgupta & Joseph Stiglitz, 1972. "On Optimal Taxation and Public Production," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(1), pages 87-103.
    4. Dreze, Jean & Stern, Nicholas, 1987. "The theory of cost-benefit analysis," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 14, pages 909-989, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sushama Murty, 2013. "Production efficiency and constraints on profit taxation and profit distribution in economies with Ramsey taxation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(3), pages 579-604, September.
    2. Stéphane Gauthier & Guy Laroque, 2019. "Production efficiency and profit taxation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 52(2), pages 215-223, February.
    3. Murty, Sushama, 2009. "Topology of utility possibility frontiers of economies with Ramsey taxation," The Warwick Economics Research Paper Series (TWERPS) 912, University of Warwick, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sushama Murty, "undated". "Lessons from optimal taxation theory for the GST and beyond," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 17-07, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    2. Sushama Murty, 2013. "Production efficiency and constraints on profit taxation and profit distribution in economies with Ramsey taxation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(3), pages 579-604, September.
    3. Murty, Sushama, 2009. "Topology of utility possibility frontiers of economies with Ramsey taxation," Economic Research Papers 271288, University of Warwick - Department of Economics.
    4. Stéphane Gauthier & Guy Laroque, 2019. "Production efficiency and profit taxation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 52(2), pages 215-223, February.
    5. Coate, Stephen, 2000. "An Efficiency Approach to the Evaluation of Policy Changes," Economic Journal, Royal Economic Society, vol. 110(463), pages 437-455, April.
    6. Joong-Ho Kook & Seok Gyu Choi, 2022. "A Comparative Study of Household Consumption Patterns and Optimal Commodity Tax Rates between Korea and Japan," Korean Economic Review, Korean Economic Association, vol. 38, pages 479-507.
    7. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    8. Spencer Bastani & Sebastian Koehne, 2024. "How Should Consumption Be Taxed?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 80(3), pages 259-302.
    9. Will Martin & James E. Anderson, 2005. "Costs of Taxation and the Benefits of Public Goods: The Role of Income Effects," Boston College Working Papers in Economics 617, Boston College Department of Economics.
    10. Alexey Kushnir & Robertas Zubrickas, 2024. "Optimal labor income taxation with the dividend effect," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(4), pages 1169-1201, December.
    11. David Coady & Jean Dreze, 2000. "Commodity Taxation and Social Welfare: The Generalised Ramsey Rule," Working papers 87, Centre for Development Economics, Delhi School of Economics.
    12. Emran, M. Shahe, 2005. "Revenue-increasing and welfare-enhancing reform of taxes on exports," Journal of Development Economics, Elsevier, vol. 77(1), pages 277-292, June.
    13. Louis Kaplow, 1993. "Should the Government's Allocation Branch be Concerned about the Distortionary Cost of Taxation and Distributive Effects?," NBER Working Papers 4566, National Bureau of Economic Research, Inc.
    14. Louis Kaplow, 2004. "On the (Ir)Relevence of Distribution and Labor Supply Distortion of Government Policy," NBER Working Papers 10490, National Bureau of Economic Research, Inc.
    15. David Coady, 2015. "Designing and Evaluating Social Safety Nets: Theory, Evidence, and Policy Conclusions," Working Papers id:7496, eSocialSciences.
    16. Spencer Bastani & Daniel Waldenström, 2018. "How should capital be taxed? The Swedish experience," Working Papers hal-02878153, HAL.
    17. Reinhorn, Leslie J., 2013. "Production efficiency and excess supply," Mathematical Social Sciences, Elsevier, vol. 65(2), pages 92-100.
    18. Waldenstrom, Daniel & Bastani, Spencer, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," CEPR Discussion Papers 12880, C.E.P.R. Discussion Papers.
    19. Atsushi Tsuneki, 2002. "Shadow-Pricing Interpretation of the Pigovian Rule for the Optimal Provision of Public Goods: A Note," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(1), pages 93-104, January.
    20. Louis Kaplow, 2006. "Discounting Dollars, Discounting Lives: Intergenerational Distributive Justice and Efficiency," NBER Working Papers 12239, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    ;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:uwarer:271292. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.