Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/75699
Authors: 
Sandmo, Agnar
Year of Publication: 
2001
Series/Report no.: 
CESifo Working Paper 579
Abstract: 
The marginal cost of public funds is usually seen as a number greater than one, reflecting the efficiency cost of distortionary taxes. But economic intuition suggests that since green taxes are efficiency-enhancing the MCF with such taxes will be less than one. The paper demonstrates that this intuition is not necessarily true, even when a green tax is the sole source of funds. The analysis also considers the MCF with a proportional income tax, given the presence of green taxes. It compares the optimization approach to the MCF with that of a balanced budget reform and shows that they lead to equivalent results.
Document Type: 
Working Paper

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