Restoring Ramsey tax lessons to Mirrleesian tax settings: Atkinson–Stiglitz and Ramsey reconciled

Helmuth Cremer and Firouz Gahvari

Social Choice and Welfare, 2017, vol. 49, issue 1, No 2, 35 pages

Abstract: Abstract This paper restores many of the Ramsey tax/pricing lessons perceived as outdated in the optimal tax literature following the Atkinson and Stiglitz (J Public Econ 6:55–75, 1976) framework wherein differential commodity taxes are considered to be redundant. The key to our findings is the incorporation of a “break-even constraint” for public firms into the Atkinson and Stiglitz framework. Break-even constraints are fundamental to the regulatory pricing literature but have somehow been overlooked in the optimal tax literature. Incorporating them reconciles the optimal-tax and the regulatory-pricing views on Ramsey tax/pricing rules.

Keywords: Public Firm; Price Rule; Ramsey Price; Marshallian Demand; Ramsey Model (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s00355-017-1046-8

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