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Optimal Tax and Public Investment Rules for Congestion Type of Externalities

Optimal Tax and Public Investment Rules for Congestion Type of Externalities Optimal government policy is considered in a second‐best framework where consumers and producers cause an externality of the congestion type and income distribution issues are taken into account. The theoretical results of the optimal tax literature are adapted using the concept of the net social Pigouvian tax. An illustrative AGE model uncovers the relative importance of its components. The model demonstrates that the level of the externality tax does not depend strongly on distribution concerns, as reoptimization of the other taxes ensures that the income distribution objective is reached. The model also allows us to study the interaction between externality taxes and public abatement. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Scandinavian Journal of Economics Wiley

Optimal Tax and Public Investment Rules for Congestion Type of Externalities

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References (22)

Publisher
Wiley
Copyright
The editors of the Scandinavian Journal of Economics, 1997
ISSN
0347-0520
eISSN
1467-9442
DOI
10.1111/1467-9442.00062
Publisher site
See Article on Publisher Site

Abstract

Optimal government policy is considered in a second‐best framework where consumers and producers cause an externality of the congestion type and income distribution issues are taken into account. The theoretical results of the optimal tax literature are adapted using the concept of the net social Pigouvian tax. An illustrative AGE model uncovers the relative importance of its components. The model demonstrates that the level of the externality tax does not depend strongly on distribution concerns, as reoptimization of the other taxes ensures that the income distribution objective is reached. The model also allows us to study the interaction between externality taxes and public abatement.

Journal

The Scandinavian Journal of EconomicsWiley

Published: Jun 1, 1997

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