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An alternative way to model merit good arguments

  • Fred Schroyen


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    Besley (1988) uses a scaling approach to model merit good arguments in commodity tax policy. In this paper, I question this approach on the grounds that it produces 'wrong' recommendations--taxation (subsidisation) of merit (demerit) goods--whenever the demand for the (de)merit good is inelastic. I propose an alternative approach that does not suffer from this deficiency, and derive the ensuing first and second best tax rules, as well as the marginal cost expressions to perform tax reform analysis.

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    Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 595.03.

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    Length: 15
    Date of creation: 21 Oct 2003
    Date of revision:
    Handle: RePEc:aub:autbar:595.03
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    1. Madden, David, 1995. "Labour Supply, Commodity Demand and Marginal Tax Reform," Economic Journal, Royal Economic Society, vol. 105(429), pages 485-97, March.
    2. Pazner, Elisha A, 1972. "Merit Wants and the Theory of Taxation," Public Finance = Finances publiques, , vol. 27(4), pages 460-72.
    3. Feehan, James P., 1990. "A simple model for merit good arguments : A comment," Journal of Public Economics, Elsevier, vol. 43(1), pages 127-129, October.
    4. repec:ebl:ecbull:v:8:y:2003:i:8:p:1-5 is not listed on IDEAS
    5. Besley, Timothy, 1988. "A simple model for merit good arguments," Journal of Public Economics, Elsevier, vol. 35(3), pages 371-383, April.
    6. Kaplanoglou, Georgia & Newbery, David Michael, 2003. "Indirect Taxation in Greece: Evaluation and Possible Reform," International Tax and Public Finance, Springer, vol. 10(5), pages 511-33, September.
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