IDEAS home Printed from https://ideas.repec.org/p/cep/stidep/27.html
   My bibliography  Save this paper

Commodity Taxation and Social Welfare: The Generalised Ramsey Rule

Author

Listed:
  • David Coady
  • Jean Drèze

Abstract

Commodity taxes have three distinct roles: (1) revenue collection, (2) interpersonal redistribution, and (3) resource allocation. The paper presents an integrated treatment of these three concerns in a second-best general equilibrium framework, which leads to the 'generalised Ramsey rule' for optimum taxation. We show how many standard results on optimum taxation and tax reform have a straightforward counterpart in this general framework. Using this framework, we also try to clarify the notion of 'deadweight loss' as well as the relation between alternative distributional assumptions and the structure of optimum taxes.

Suggested Citation

  • David Coady & Jean Drèze, 2000. "Commodity Taxation and Social Welfare: The Generalised Ramsey Rule," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 27, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  • Handle: RePEc:cep:stidep:27
    as

    Download full text from publisher

    File URL: http://sticerd.lse.ac.uk/dps/de/dedps27.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Dixit, Avinash, 1975. "Welfare effects of tax and price changes," Journal of Public Economics, Elsevier, pages 103-123.
    2. J. A. Mirrlees, 1976. "Optimal Tax Theory: A Synthesis," Working papers 176, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Sandmo, Agnar, 1974. "A Note on the Structure of Optimal Taxation," American Economic Review, American Economic Association, vol. 64(4), pages 701-706, September.
    4. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. Ahmad,Etisham & Stern,Nicholas, 1991. "The Theory and Practice of Tax Reform in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521397421, November.
    6. Sen, Amartya K, 1972. "Control Areas and Accounting Prices: An Approach to Economic Evaluation," Economic Journal, Royal Economic Society, vol. 82(325), pages 486-501, Supplemen.
    7. 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.
    8. Guesnerie, Roger, 1979. "General statements on second best pareto optimality," Journal of Mathematical Economics, Elsevier, vol. 6(2), pages 169-194, July.
    9. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, pages 55-75.
    10. Kay, J. A., 1980. "The deadweight loss from a tax system," Journal of Public Economics, Elsevier, pages 111-119.
    11. P. Diamond & J. Mirrlees, 1976. "Private Constant Returns and Public Shadow Prices," Review of Economic Studies, Oxford University Press, vol. 43(1), pages 41-47.
    12. David Coady, 1997. "Agricultural Pricing Policies in Developing Countries: An Application to Pakistan," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(1), pages 39-57, January.
    13. Hoff, Karla, 1994. "The second theorem of the second best," Journal of Public Economics, Elsevier, pages 223-242.
    14. A. B. Atkinson & N. H. Stern, 1974. "Pigou, Taxation and Public Goods," Review of Economic Studies, Oxford University Press, vol. 41(1), pages 119-128.
    15. Sandmo, Agnar, 1976. "Optimal taxation : An introduction to the literature," Journal of Public Economics, Elsevier, pages 37-54.
    16. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, December.
    17. Dixit, Avinash, 1985. "Tax policy in open economies," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 6, pages 313-374 Elsevier.
    18. Auerbach, Alan J., 1985. "The theory of excess burden and optimal taxation," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127 Elsevier.
    19. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, pages 327-358.
    20. Dreze, Jean & Stern, Nicholas, 1990. "Policy reform, shadow prices, and market prices," Journal of Public Economics, Elsevier, pages 1-45.
    21. Dixit, Avinash K, 1970. "On the Optimum Structure of Commodity Taxes," American Economic Review, American Economic Association, vol. 60(3), pages 295-301, June.
    22. Deaton, Angus & Stern, Nicholas, 1986. "Optimally uniform commodity taxes, taste differences and lump-sum grants," Economics Letters, Elsevier, vol. 20(3), pages 263-266.
    Full references (including those not matched with items on IDEAS)

    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:cep:stidep:27. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://sticerd.lse.ac.uk/_new/publications/default.asp .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.