IDEAS home Printed from https://ideas.repec.org/p/van/wpaper/0501.html

Shadow Prices for a Nonconvex Public Technology in the Presence of Private Constant Returns

Author

Listed:
  • John A. Weymark

    (Department of Economics, Vanderbilt University)

Abstract

Diamond and Mirrlees have shown that public sector shadow prices should be set equal to the private producer prices in some circumstances even if taxes are not optimal when the public production technology is convex and some of the private sector firms have constant-returns-to-scale technologies. In this article, it is shown that the optimal public production plan maximizes profits using the private producer prices on a subset of the public production set if this set is nonconvex. Sufficient conditions for profit maximization using these prices to identify the optimal public production plan on the whole public production set are also identified.

Suggested Citation

  • John A. Weymark, 2005. "Shadow Prices for a Nonconvex Public Technology in the Presence of Private Constant Returns," Vanderbilt University Department of Economics Working Papers 0501, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:0501
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/pubs/VUECON/vu05-w01.pdf
    File Function: First version, 2005
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Guesnerie,Roger, 1998. "A Contribution to the Pure Theory of Taxation," Cambridge Books, Cambridge University Press, number 9780521629560, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Drèze, Jacques & Le Breton, Michel & Savvateev, Alexei & Weber, Shlomo, 2008. ""Almost" subsidy-free spatial pricing in a multi-dimensional setting," Journal of Economic Theory, Elsevier, vol. 143(1), pages 275-291, November.
    2. da Costa, Carlos E. & Pereira, Thiago, 2014. "On the efficiency of equal sacrifice income tax schedules," European Economic Review, Elsevier, vol. 70(C), pages 399-418.
    3. Egbert Dierker & Hans Haller, 1990. "Tax systems and direct mechanisms in large finite economies," Journal of Economics, Springer, vol. 52(2), pages 99-116, June.
    4. Mikhail Golosov & Aleh Tsyvinski, 2007. "Optimal Taxation with Endogenous Insurance Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 487-534.
    5. James M. Malcomson, 2005. "Supplier Discretion Over Provision: Theory and an Application to Medical Care," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 412-429, Summer.
    6. Hellwig, Martin F., 2007. "A contribution to the theory of optimal utilitarian income taxation," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1449-1477, August.
    7. Murty, Sushama, 2009. "Topology of utility possibility frontiers of economies with Ramsey taxation," Economic Research Papers 271288, University of Warwick - Department of Economics.
    8. Robin Boadway, 1998. "The Mirrlees Approach to the Theory of Economic Policy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(1), pages 67-81, February.
    9. Carlos E. da Costa & Lucas J. Maestri, 2019. "Optimal Mirrleesian taxation in non-competitive labor markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(4), pages 845-886, November.
    10. Mathias Hungerbühler & Etienne Lehmann & Alexis Parmentier & Bruno Van Der Linden, 2006. "Optimal Redistributive Taxation in a Search Equilibrium Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(3), pages 743-767.
    11. Bierbrauer, Felix, 2006. "Optimal Income Taxation and Public Good Provision in a Two-Class Economy," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 97, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    12. da Costa, Carlos E. & Maestri, Lucas J., 2007. "The risk properties of human capital and the design of government policies," European Economic Review, Elsevier, vol. 51(3), pages 695-713, April.
    13. Boadway, Robin & Pestieau, Pierre, 2002. "Indirect Taxation and Redistribution: The Scope of the Atkinson-Stiglitz Theorem," Queen's Economics Department Working Papers 273431, Queen's University - Department of Economics.
    14. Araujo, Aloisio & Moreira, Humberto, 2010. "Adverse selection problems without the Spence-Mirrlees condition," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1113-1141, May.
    15. Jang‐Ting Guo & Alan Krause, 2011. "Optimal Nonlinear Income Taxation with Habit Formation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(3), pages 463-480, June.
    16. Byungchae Rhee, 2004. "A Characterization of Optimal Feasible Tax Mechanism," Econometric Society 2004 Far Eastern Meetings 551, Econometric Society.
    17. Noldeke,G. & Samuelson,L., 2004. "Decomposable principal-agent problems," Working papers 14, Wisconsin Madison - Social Systems.
    18. Peter J. Hammond, 2017. "Designing a strategyproof spot market mechanism with many traders: twenty-two steps to Walrasian equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(1), pages 1-50, January.
    19. Cintra, Marcos, 2009. "Bank transactions: pathway to the single tax ideal A modern tax technology;the Brazilian experience with a bank transactions tax (1993-2007)," MPRA Paper 16710, University Library of Munich, Germany.
    20. Murty, Sushama, 2010. "Externalities and fundamental nonconvexities: A reconciliation of approaches to general equilibrium externality modeling and implications for decentralization," Journal of Economic Theory, Elsevier, vol. 145(1), pages 331-353, January.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:van:wpaper:0501. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: http://www.vanderbilt.edu/econ/wparchive/index.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.