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Pareto Improving Taxes

Listed author(s):
  • J. D. Geanakoplos
  • H. M. Polemarchakis
Registered author(s):

    We show that in almost every economy with separable externalities, every competitive equilibrium can be Pareto improved by a package of anonymous commodity taxes that causes prices to adjust and markets to reclear at different levels of individual consumption. This constrained suboptimality of competitive allocations might provide a rationale for economic policy in economies with externalities. It shows that policy makers should look for good tax packages that help everybody, rather than thinking taxes must inevitably be bad for some lobby that will oppose them.

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    File URL: http://cowles.econ.yale.edu/P/cd/d15b/d1576.pdf
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    Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 321307000000000350.

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    Date of creation: 02 Sep 2006
    Handle: RePEc:cla:levrem:321307000000000350
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    16. Kenneth Arrow, 1970. "Political and Economic Evaluation of Social Effects and Externalities," NBER Chapters,in: The Analysis of Public Output, pages 1-30 National Bureau of Economic Research, Inc.
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    23. Bisin, A. & Geanakoplos, J.D. & Gottardi, P. & Minelli, E. & Polemarchakis, H., 2011. "Markets and contracts," Journal of Mathematical Economics, Elsevier, vol. 47(3), pages 279-288.
    24. Snyder, Susan K., 1999. "Testable restrictions of Pareto optimal public good provision," Journal of Public Economics, Elsevier, vol. 71(1), pages 97-119, January.
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