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Are User Fees Really Regressive?

  • George Economides
  • Apostolis Philippopoulos

This paper studies the aggregate and distributional implications of introducing user fees for publicly provided excludable public goods into a model with consumption and income taxes. The setup is a neoclassical growth model where agents differ in earnings and second-best policy is chosen by a Ramsey government. Our main result is that the adoption of user fees by the Ramsey government not only increases aggregate efficiency, but it also decreases inequality. This result is in contrast to common view and policy practice.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3875.

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Date of creation: 2012
Date of revision:
Handle: RePEc:ces:ceswps:_3875
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  1. Paul J. Gertler & Luis Locay & Warren C. Sanderson, 1987. "Are User Fees Regressive? The Welfare Implications of Health Care Financing Proposals in Peru," NBER Working Papers 2299, National Bureau of Economic Research, Inc.
  2. Mankiw, N. Gregory & Weinzierl, Matthew Charles & Yagan, Danny Ferris, 2009. "Optimal Taxation in Theory and Practice," Scholarly Articles 4263739, Harvard University Department of Economics.
  3. Fraser, Clive D., 1996. "On the provision of excludable public goods," Journal of Public Economics, Elsevier, vol. 60(1), pages 111-130, April.
  4. Krusell, Per, 2002. "Time-consistent redistribution," European Economic Review, Elsevier, vol. 46(4-5), pages 755-769, May.
  5. George Economides & Apostolis Philippopoulos, 2008. "Growth enhancing policy is the means to sustain the environment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 207-219, January.
  6. Bernd Huber & Marco Runkel, 2009. "Tax competition, excludable public goods, and user charges," International Tax and Public Finance, Springer, vol. 16(3), pages 321-336, June.
  7. Lars Ljungqvist & Thomas J. Sargent, 2004. "Recursive Macroeconomic Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 026212274x, June.
  8. repec:cup:cbooks:9780521738057 is not listed on IDEAS
  9. Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Ingrid Ott & Stephen J. Turnovsky, 2005. "Excludable and Non-excludable Public Inputs: Consequences for Economic Growth," Working Paper Series in Economics 2, University of L√ľneburg, Institute of Economics.
  11. Konstantinos Angelopoulos & James Malley & Apostolis Philippopoulos, 2011. "Time-consistent fiscal policy under heterogeneity: conflicting or common interests?," Working Papers 142, Bank of Greece.
  12. Clemens Fuest & Martin Kolmar, 2004. "A Theory of User-Fee Competition," CESifo Working Paper Series 1166, CESifo Group Munich.
  13. Kurtis J. Swope & Eckhard Janeba, 2001. "Taxes or Fees? The Political Economy of Providing Excludable Public Goods," CESifo Working Paper Series 542, CESifo Group Munich.
  14. repec:cup:cbooks:9780521494267 is not listed on IDEAS
  15. Isabel Horta Correia, 2005. "Consumption Taxes and Redistribution," Working Papers w200511, Banco de Portugal, Economics and Research Department.
  16. Guo, Jang-Ting & Lansing, Kevin J., 1999. "Optimal taxation of capital income with imperfectly competitive product markets," Journal of Economic Dynamics and Control, Elsevier, vol. 23(7), pages 967-995, June.
  17. Kevin J. Lansing, 1998. "Optimal redistributive capital taxation in a neoclassical growth model," Working Papers in Applied Economic Theory 99-01, Federal Reserve Bank of San Francisco.
  18. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  19. Park, Hyun & Philippopoulos, Apostolis, 2003. "On the dynamics of growth and fiscal policy with redistributive transfers," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 515-538, March.
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