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

  • Aronsson, Thomas


    (Department of Economics, Umeå University)

  • Persson, Lars


    (Department of Economics, Umeå University)

  • Sjögren, Tomas


    (Department of Economics, Umeå University)

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.

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Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 747.

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Length: 46 pages
Date of creation: 17 Jun 2008
Date of revision: 03 Nov 2008
Handle: RePEc:hhs:umnees:0747
Contact details of provider: Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
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