On Policy Relevance of Ramsey Tax Rules

Sheikh Selim ()

No E2006/19, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: The Ramsey approach to optimal taxation and Ramsey tax rules have amassed substance in economic theory. However, they are often criticized on grounds of practicality, fairness, feasibility and some other aspects of designing actual tax policy. This paper contests these criticisms,it discusses how closely or remotely Ramsey rules are followed in designing tax policy. It argues that the most of these common criticisms, be it realistic, such as administrative and compliance costs, or be it rather abstract, such as fairness, are either unimportant or irrelevant for Ramsey taxation. The more important inadequacy of the traditional Ramsey tax models is the selective modelling of incentive effects of tax reforms and their limited applicability for designing tax policy in developing countries.

Keywords: Optimal taxation; Ramsey tax rules; Policy relevance (search for similar items in EconPapers)
JEL-codes: E61 E62 H21 H30 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2006-03, Revised 2006-07
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pub
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Published in economics-ejournal economics discussion Papers, No 2007-31. http://www.economics-ejournal.org/economics/discussionpapers/2007-31

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Related works:
Working Paper: On Policy Relevance of Ramsey Tax Rules (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2006/19

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