Production efficiency and excess supply
This paper demonstrates that intermediate goods should not be taxed even in the presence of dividend payments to households, thus clarifying previous results. We also find that optimal government policy in a second best world may include stockpiles of output - private supply exceeds private demand, and the government purchases the surplus. This may provide a possible explanation for some agricultural policies.
|Date of creation:||01 Nov 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Durham University Business School, Mill Hill Lane, Durham DH1 3LB, England|
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