Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76515
Authors: 
Sandvik, Bjørn
Year of Publication: 
2003
Series/Report no.: 
CESifo Working Paper 1025
Abstract: 
There still seems to be some confusion about the consequences of normalisations in the optimal taxation literature. We claim that:1) Normalisations do not matter for the real solution of optimal taxation problem.2) Normalisations do matter for good characterisations of the solutions to optimal taxation problems.Whereas the first point is uncontroversial, the second one is less well understood. There is also a need to distinguish between the following senses of taxation of endowment:1) The taxation of own consumption of initial endowments (e.g. leisure).2) The taxation of the sale of initial endowments (e.g. labour).By postponing the normalisation of consumer prices, we detail how normalisations of consumer prices affect the characterisation of optimal commodity taxes, derive the preferred characterisation, and show how it depends on the normalisation. On the way, we discuss the effect of normalisations on measures of the marginal efficiency loss of taxation.
Subjects: 
optimal taxation
normalisation
marginal cost of public funds
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.