Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159503
Authors: 
Dragone, Davide
Lambertini, Luca
Palestini, Arsen
Year of Publication: 
2009
Series/Report no.: 
Quaderni - Working Paper DSE 662
Abstract: 
We consider the joint effect of profit and Pigouvian taxation in a model of imperfect competition. We show that, when both profit taxation and Pigouvian taxation/subsidy are used, the former is no longer neutral. The two fiscal tools are substitutes, and for any profit taxation rate there exists a unique Pigouvian tax that entails the first best outcome as an equilibrium. Our analysis therefore suggests that policy makers in charge of different taxation policies should coordinate in order to optimally design the tax menu for firms.
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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