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Production efficiency and excess supply

  • Leslie J. Reinhorn


    (Durham Business School)

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.

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Paper provided by Durham University Business School in its series Working Papers with number 2011_13.

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Date of creation: 01 Nov 2011
Date of revision:
Handle: RePEc:dur:durham:2011_13
Contact details of provider: Postal: Durham University Business School, Mill Hill Lane, Durham DH1 3LB, England
Phone: +44 (0)191 334 5200
Fax: +44 (0)191 334 5201
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  1. 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 1218-44, 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. 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.
  4. Guesnerie, Roger, 1977. "On the direction of tax reform," Journal of Public Economics, Elsevier, vol. 7(2), pages 179-202, April.
  5. Dixit, Avinash, 1987. "On Pareto-improving redistributions of aggregate economic gains," Journal of Economic Theory, Elsevier, vol. 41(1), pages 133-153, February.
  6. 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.
  7. Hahn, Frank H., 1973. "On optimum taxation," Journal of Economic Theory, Elsevier, vol. 6(1), pages 96-106, February.
  8. 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 771-84, May.
  9. W. E. Diewert & A. H. Turunen-Red & A. D. Woodland, 1989. "Productivity- and Pareto-Improving Changes in Taxes and Tariffs," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 199-215.
  10. John A. Weymark, 1981. "On Sums of Production Set Frontiers," Review of Economic Studies, Oxford University Press, vol. 48(1), pages 179-183.
  11. Michael Keen & David Wildasin, 2004. "Pareto-Efficient International Taxation," American Economic Review, American Economic Association, vol. 94(1), pages 259-275, March.
  12. Efraim Sadka, 1977. "A Note on Producer Taxation and Public Production," Review of Economic Studies, Oxford University Press, vol. 44(2), pages 385-387.
  13. Partha Dasgupta & Joseph Stiglitz, 1972. "On Optimal Taxation and Public Production," Review of Economic Studies, Oxford University Press, vol. 39(1), pages 87-103.
  14. J. A. Mirrlees, 1972. "On Producer Taxation," Review of Economic Studies, Oxford University Press, vol. 39(1), pages 105-111.
  15. Reinhorn, Leslie J., 2007. "Butter mountains and wine lakes," Economics Letters, Elsevier, vol. 94(2), pages 197-201, February.
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