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A Generalization of the Atkinson-Stiglitz (1976) Theorem on the Undesirability of Nonuniform Excise Taxation

  • Martin Hellwig

    ()

    (Max Planck Institute for Research on Collective Goods, Bonn)

The Atkinson-Stiglitz (1976) theorem on the undesirability of nonuniform excise taxation when all agents have homogeneous, separable preferences is extended to allow for nonseparability with respect to endogenous variables that will be subject to distortions. The result is useful for analysing models with production and education. For such models, the conclusion of Bovenberg and Jacobs (2005), that it is desirable to distort production rather than education choices, is shown to be reversed if the hidden characteristic affects the cost of education rather than productivity.

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Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2008_47.

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Date of creation: Dec 2008
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Handle: RePEc:mpg:wpaper:2008_47
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  1. Lans Bovenberg, A. & Jacobs, Bas, 2005. "Redistribution and education subsidies are Siamese twins," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2005-2035, December.
  2. Martin Hellwig, 2006. "Incentive Problems with Unidimensional Hidden Characteristics: A Unified Approach," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2006_26, Max Planck Institute for Research on Collective Goods, revised Apr 2010.
  3. Guy Laroque, 2004. "Indirect Taxation is Superfluous under Separability and Taste Homogeneity : A Simple Proof," Working Papers 2004-23, Centre de Recherche en Economie et Statistique.
  4. repec:dgr:uvatin:20050036 is not listed on IDEAS
  5. Stéphane Gauthier & Guy Laroque, 2008. "Separability and public finance," IFS Working Papers W08/07, Institute for Fiscal Studies.
  6. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  7. Martin Hellwig, 2008. "A Note on Deaton's Theorem on the Undesirability of Nonuniform Excise Taxation," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_45, Max Planck Institute for Research on Collective Goods.
  8. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 263-82, April.
  9. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, vol. 6(4), pages 327-358, November.
  10. Louis Kaplow, 2004. "On the Undesirability of Commodity Taxation Even When Income Taxation is Not Optimal," NBER Working Papers 10407, National Bureau of Economic Research, Inc.
  11. repec:dgr:uvatin:2005036 is not listed on IDEAS
  12. Deaton, Angus, 1979. "Optimally uniform commodity taxes," Economics Letters, Elsevier, vol. 2(4), pages 357-361.
  13. Martin Hellwig, 2008. "A Maximum Principle for Control Problems with Monotonicity Constraints," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_04, Max Planck Institute for Research on Collective Goods.
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