On the Welfare Benefits of Taxation

Charles St Pierre

MPRA Paper from University Library of Munich, Germany

Abstract: A large tax wedge can lead to a dramatic increase in economic efficiency. The market share of 'deadweight loss' produced by a tax wedge consists of inefficient producers and indifferent consumers. The high costs in resources involved in production of the relatively small quantity of 'deadweight loss benefits' can be much more efficiently applied elsewhere in an economy. Because of this increase in efficiency, we find a substantial government sector and its services may be maintained essentially without cost. We also examine the case of regulation induced wedges and deadweight loss, and find comparable results. The case of price floors we find equivocal. Monopoly and comparable economic structures can also result in improved economic efficiency. Because the resultant deterioration of economic performance may be dramatic, tax wedges and regulations already in place should be examined carefully before their removal.

Keywords: social welfare; taxation; tax wedge; regulation; deadweight loss; economic efficiency; opportunity costs (search for similar items in EconPapers)
JEL-codes: D6 D61 H21 H23 (search for similar items in EconPapers)
Date: 2017-01-31, Revised 2017-02-02
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/76547/8/MPRA_paper_76497.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:76547

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().