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Are User Fees Really Regressive?

Author

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  • George Economides
  • Apostolis Philippopoulos

Abstract

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.

Suggested Citation

  • George Economides & Apostolis Philippopoulos, 2012. "Are User Fees Really Regressive?," CESifo Working Paper Series 3875, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3875
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3875.pdf
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    References listed on IDEAS

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    1. Ingrid Ott & Stephen J. Turnovsky, 2006. "Excludable and Non-excludable Public Inputs: Consequences for Economic Growth," Economica, London School of Economics and Political Science, vol. 73(292), pages 725-748, November.
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    5. Bernd Huber & Marco Runkel, 2009. "Tax competition, excludable public goods, and user charges," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(3), pages 321-336, June.
    6. Kurtis J. Swope & Eckhard Janeba, 2005. "Taxes or Fees? The Political Economy of Providing Excludable Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(3), pages 405-426, August.
    7. Fraser, Clive D., 1996. "On the provision of excludable public goods," Journal of Public Economics, Elsevier, vol. 60(1), pages 111-130, April.
    8. Konstantinos Angelopoulos & James Malley & Apostolis Philippopoulos, 2011. "Time-consistent fiscal policy under heterogeneity: Conflicting or common interests?," Working Papers 2011_06, Business School - Economics, University of Glasgow.
    9. Lansing, Kevin J., 1999. "Optimal redistributive capital taxation in a neoclassical growth model," Journal of Public Economics, Elsevier, pages 423-453.
    10. Fuest, Clemens & Kolmar, Martin, 2007. "A theory of user-fee competition," Journal of Public Economics, Elsevier, pages 497-509.
    11. Gertler, Paul & Locay, Luis & Sanderson, Warren, 1987. "Are user fees regressive? : The welfare implications of health care financing proposals in Peru," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 67-88.
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    13. 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.
    14. Isabel Correia, 2010. "Consumption Taxes and Redistribution," American Economic Review, American Economic Association, vol. 100(4), pages 1673-1694, September.
    15. Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, pages 59-83.
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    Cited by:

    1. George Economides & Dimitris Papageorgiou & Apostolis Philippopoulos & Vanghelis Vassilatos, 2013. "Smaller Public Sectors in the Euro Area: Aggregate and Distributional Implications," CESifo Economic Studies, CESifo, vol. 59(3), pages 536-558, September.

    More about this item

    Keywords

    user fees; Ramsey taxation; efficiency; inequality;

    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General

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