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Mixed Taxation, Public Goods and Transboundary Externalities: A Model with Large Jurisdictions

Author

Listed:
  • Aronsson, Thomas

    () (Department of Economics, Umeå University)

  • Persson, Lars

    () (Department of Economics, Umeå University)

  • Sjögren, Tomas

    () (Department of Economics, Umeå University)

Abstract

This paper concerns income taxation, commodity taxation, production taxation and public good provision in a multi-jurisdiction framework with transboundary environmental damage. We assume that each jurisdiction is large in the sense that its government is able to influence the world-market producer price of the externality-generating commodity. The decision-problem facing the government in each such jurisdiction is represented by a two-type model (with asymmetric information between the government and the private sector). We show how the possibility to influence the world-market producer price adds mechanisms of relevance for redistribution and externality-correction which, in turn, affect the domestic use of taxation and public goods. Finally, with the noncooperative Nash equilibrium as a reference case, we consider the welfare effects of policy coordination.

Suggested Citation

  • Aronsson, Thomas & Persson, Lars & Sjögren, Tomas, 2008. "Mixed Taxation, Public Goods and Transboundary Externalities: A Model with Large Jurisdictions," Umeå Economic Studies 747, Umeå University, Department of Economics, revised 03 Nov 2008.
  • Handle: RePEc:hhs:umnees:0747
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    Keywords

    Trade and Environment; Optimal Taxation; Externalities;

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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