Mixed Taxation, Public Goods and Transboundary Externalities: A Model with Large Jurisdictions

Thomas Aronsson (), Lars Persson () and Tomas Sjögren ()
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Thomas Aronsson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Lars Persson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Tomas Sjögren: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 747, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: This paper concerns income taxation, commodity taxation, production taxation and public good provision in a multi-jurisdiction framework with transboundary environmental damage. We assume that each jurisdiction is large in the sense that its government is able to influence the world-market producer price of the externality-generating commodity. The decision-problem facing the government in each such jurisdiction is represented by a two-type model (with asymmetric information between the government and the private sector). We show how the possibility to influence the world-market producer price adds mechanisms of relevance for redistribution and externality-correction which, in turn, affect the domestic use of taxation and public goods. Finally, with the noncooperative Nash equilibrium as a reference case, we consider the welfare effects of policy coordination.

Keywords: Trade and Environment; Optimal Taxation; Externalities (search for similar items in EconPapers)
JEL-codes: F18 H21 H23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env, nep-pbe and nep-pub
Date: 2008-06-17, Revised 2008-11-03

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Persistent link: http://EconPapers.repec.org/RePEc:hhs:umnees:0747

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