Commodity taxes and taste heterogeneity

Stephane Gauthier and Fanny Henriet

European Economic Review, 2018, vol. 101, issue C, 284-296

Abstract: We study optimal linear commodity taxes in the presence of non-linear income taxes when agents differ in skills and tastes for consumption. We show that optimal commodity taxes are partly determined by a many-person Ramsey rule when there is taste heterogeneity within income classes. The usual role of commodity taxes in relaxing incentive constraints explains the remaining part of these taxes when there is taste heterogeneity between income classes. We quantify these two parts using French consumption microdata and find that commodities taxes are only shaped by many-person Ramsey considerations.

Keywords: Taste heterogeneity; Commodity taxes; Income taxation; Social valuations (search for similar items in EconPapers)
JEL-codes: D12 D82 H21 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:101:y:2018:i:c:p:284-296

DOI: 10.1016/j.euroecorev.2017.10.017

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