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Marginal Cost of Indirect Taxation in the presence of a Demerit Externality with an Application to Carbon Dioxide Emissions in Belgium

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  • B. DEFLOOR

    ()

Abstract

This paper aims to calculate marginal costs of funds (MCF) in the presence of an externality with demerit properties by using a utility scaling approach. It is an extension of a model put forward by Schroyen (2010). In the empirical section the MCF of indirect taxes in Belgium are calculated taking into account the existence of carbon dioxide emissions as demerit externality. The results reveal that scaling has a significant impact on switches in the ranking of the MCF.

Suggested Citation

  • B. Defloor, 2010. "Marginal Cost of Indirect Taxation in the presence of a Demerit Externality with an Application to Carbon Dioxide Emissions in Belgium," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 10/656, Ghent University, Faculty of Economics and Business Administration.
  • Handle: RePEc:rug:rugwps:10/656
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    File URL: http://wps-feb.ugent.be/Papers/wp_10_656.pdf
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    References listed on IDEAS

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    1. Mayeres, Inge & Proost, Stef, 2001. "Marginal tax reform, externalities and income distribution," Journal of Public Economics, Elsevier, vol. 79(2), pages 343-363, February.
    2. Mazzanti, Massimiliano, 2002. "Cultural heritage as multi-dimensional, multi-value and multi-attribute economic good: toward a new framework for economic analysis and valuation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 31(5), pages 529-558.
    3. Schob, Ronnie, 1996. "Evaluating Tax Reforms in the Presence of Externalities," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 537-555, October.
    4. Decoster, Andre & Schokkaert, Erik, 1990. "Tax reform results with different demand systems," Journal of Public Economics, Elsevier, vol. 41(3), pages 277-296, April.
    5. Racionero, Maria del Mar, 2001. "Optimal Tax Mix with Merit Goods," Oxford Economic Papers, Oxford University Press, vol. 53(4), pages 628-641, October.
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • 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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