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Optimal commodity taxation with varying quality of goods
Linnaeus University, School of Business and Economics, Department of Economics and Statistics. Uppsala University ; CESifo, Germany.
Uppsala University ; CESifo, Germany.
University of Milan, Italy ; Bocconi University of Milan, Italy ; Uppsala University ; CESifo, Germany.
2016 (English)In: Research in Economics, ISSN 1090-9443, E-ISSN 1090-9451, Vol. 70, no 1, 89-100 p.Article in journal (Refereed) Published
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Text
Abstract [en]

A standard result in the optimal taxation literature is that when agents differ in market ability and the government aims at redistributing from high- to low-skilled agents by means of an optimal nonlinear labor income tax and a set of commodity taxes, an optimally designed commodity tax structure should encourage (discourage) the consumption of goods/services that are complement with labor (leisure). In this paper we highlight that when agents can choose both the quality and the quantity of a given good/service, this standard commodity tax result needs to be qualified. First, we show that it becomes relevant to distinguish between specific and ad valorem taxes/subsidies. Second, whether the standard result holds or not depends on how the concept of labor (leisure) complement is defined, namely, whether it is defined in terms of number of units or in terms of expenditure. We also show that levying specific and ad valorem taxes at opposite signs on a given good can be a feature of the second-best optimum.

Place, publisher, year, edition, pages
2016. Vol. 70, no 1, 89-100 p.
Keyword [en]
Nonlinear income taxation, Commodity taxation, Redistribution, Varying quality
National Category
Economics
Research subject
Economy, Economics
Identifiers
URN: urn:nbn:se:lnu:diva-51021DOI: 10.1016/j.rie.2015.11.005Scopus ID: 2-s2.0-84959563601OAI: oai:DiVA.org:lnu-51021DiVA: diva2:912895
Available from: 2016-03-18 Created: 2016-03-18 Last updated: 2016-09-01Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf