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Pigouvian Taxation with Administrative Costs

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  • A. Mitchell Polinsky
  • Steven Shavell

Abstract

This paper examines how the optimal Pigouvian tax should be adjusted to reflect administrative costs. Several cases are examined, depending on whether the administrative costs are fixed per firm taxed or are a function of the amount of tax collected, and on whether such costs are borne by the government or by the taxed firm. In some cases, the presence of administrative costs increases the optimal tax above the external cost, while in other cases it leads to a decrease in the tax.

Suggested Citation

  • A. Mitchell Polinsky & Steven Shavell, 1981. "Pigouvian Taxation with Administrative Costs," NBER Working Papers 0742, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0742
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    References listed on IDEAS

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    1. Yitzhaki, Shlomo, 1979. "A Note on Optimal Taxation and Administrative Costs," American Economic Review, American Economic Association, vol. 69(3), pages 475-480, June.
    2. Stern, Nicholas & Carruth, Alan & Deans, David, "undated". "Optimum Taxation With Errors In Administration," Economic Research Papers 269055, University of Warwick - Department of Economics.
    3. Heller, Walter P & Shell, Karl, 1974. "On Optimal Taxation with Costly Administration," American Economic Review, American Economic Association, vol. 64(2), pages 338-345, May.
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