Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154877
Authors: 
Cremer, Helmuth
Gahvari, Firouz
Ladoux, Norbert
Year of Publication: 
1998
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 19.1998
Abstract: 
This paper re-examines the optimal tax design problem (income and commodities) in the presence of externalities. The nature of the second-best, and the choice of the tax instruments, are motivated by the informational structure in the economy. The main results are: (i) environmental levies (linear or nonlinear) differ in formula from Pigouvian taxes by the expressions for the optimal tax on private goods; (ii) externalities do not affect commodity tax formulas (linear and nonlinear) for private goods; (iii) externalities do not affect the income tax structure if commodity taxes are nonlinear and affect it if commodity taxes are linear; and (iv) a general income tax plus strictly Pigouvian taxes are sufficient for efficient taxation if individuals of different types have identical marginal rates of substitution (at any given consumption bundle).
Subjects: 
Optimal taxation
Externalities
Environmental levies
Second-best
Informational structure
JEL: 
H21
H23
Document Type: 
Working Paper

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