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Production efficiency and excess supply

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  • Leslie J. Reinhorn

    () (Durham Business School)

Abstract

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.

Suggested Citation

  • Leslie J. Reinhorn, 2011. "Production efficiency and excess supply," Working Papers 2011_13, Durham University Business School.
  • Handle: RePEc:dur:durham:2011_13
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    File URL: http://dro.dur.ac.uk/10339
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    References listed on IDEAS

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    1. Hammond, Peter J & Sempere, Jaime, 1995. "Limits to the Potential Gains from Economic Integration and Other Supply Side Policies," Economic Journal, Royal Economic Society, vol. 105(432), pages 1180-1204, September.
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    4. Guesnerie, Roger, 1977. "On the direction of tax reform," Journal of Public Economics, Elsevier, vol. 7(2), pages 179-202, April.
    5. Timothy Besley & Torsten Persson, 2009. "The Origins of State Capacity: Property Rights, Taxation, and Politics," American Economic Review, American Economic Association, vol. 99(4), pages 1218-1244, September.
    6. Reinhorn, Leslie J., 2007. "Butter mountains and wine lakes," Economics Letters, Elsevier, vol. 94(2), pages 197-201, February.
    7. Sushama Murty, 2010. "Constraints on profit income distribution and production efficiency in private ownership economies with Ramsey taxation," Discussion Papers 1010, Exeter University, Department of Economics.
    8. Weymark, John A., 1979. "A reconciliation of recent results in optimal taxation theory," Journal of Public Economics, Elsevier, vol. 12(2), pages 171-189, October.
    9. J. A. Mirrlees, 1972. "On Producer Taxation," Review of Economic Studies, Oxford University Press, vol. 39(1), pages 105-111.
    10. Efraim Sadka, 1977. "A Note on Producer Taxation and Public Production," Review of Economic Studies, Oxford University Press, vol. 44(2), pages 385-387.
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    13. John A. Weymark, 1981. "On Sums of Production Set Frontiers," Review of Economic Studies, Oxford University Press, vol. 48(1), pages 179-183.
    14. Michael Keen & David Wildasin, 2004. "Pareto-Efficient International Taxation," American Economic Review, American Economic Association, vol. 94(1), pages 259-275, March.
    15. Partha Dasgupta & Joseph Stiglitz, 1972. "On Optimal Taxation and Public Production," Review of Economic Studies, Oxford University Press, vol. 39(1), pages 87-103.
    16. Berliant, Marcus & Page, Frank H, Jr, 2001. "Income Taxes and the Provision of Public Goods: Existence of an Optimum," Econometrica, Econometric Society, vol. 69(3), pages 771-784, May.
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    Cited by:

    1. Sushama Murty, 2013. "Production efficiency and constraints on profit taxation and profit distribution in economies with Ramsey taxation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(3), pages 579-604, September.
    2. Sushama Murty, 2010. "Constraints on profit income distribution and production efficiency in private ownership economies with Ramsey taxation," Discussion Papers 1010, Exeter University, Department of Economics.
    3. Murty, Sushama, 2009. "Topology of utility possibility frontiers of economies with Ramsey taxation," The Warwick Economics Research Paper Series (TWERPS) 912, University of Warwick, Department of Economics.

    More about this item

    Keywords

    production efficiency; excess supply; optimal taxation; non-tight equilibrium; price supports;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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