Pareto Improving Taxes

John Geanakoplos () and H. M. Polemarchakis
Additional contact information
John Geanakoplos: Cowles Foundation, Yale University, https://economics.yale.edu/people/faculty/john-geanakoplos
H. M. Polemarchakis: Dept. of Economics, University of Warwick

No 1662, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We show that in almost every economy with separable externalities, every competitive equilibrium can be Pareto improved by a package of anonymous commodity taxes that causes prices to adjust and markets to reclear at different levels of individual consumption. This constrained suboptimality of competitive allocations might provide a rationale for economic policy in economies with externalities. It shows that policy makers should look for good tax packages that help everybody, rather than thinking taxes must inevitably be bad for some lobby that will oppose them.

Keywords: Externalities; Commodity taxes; Constrained suboptimality (search for similar items in EconPapers)
JEL-codes: D50 D60 D62 D82 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2008-05
New Economics Papers: this item is included in nep-pbe and nep-pub
Note: CFP 1235.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

Published in Journal of Mathematical Economics (2008), 44: 682-696

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Journal Article: Pareto improving taxes (2008)
Working Paper: Pareto Improving Taxes (2006)
Working Paper: Pareto Improving Taxes (2006)
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