Pareto improving taxes with externalities

Van-Quy Nguyen (), Jean-Marc Bonnisseau () and Elena L. Del Mercato ()
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Van-Quy Nguyen: Faculty of Mathematical Economics, National Economics University, Hanoi, Vietnam
Jean-Marc Bonnisseau: Université Paris 1 Panthéon-Sorbonne, Centre d'Economie de la Sorbonne, Paris School of Economics, https://centredeconomiesorbonne.cnrs.fr
Elena L. Del Mercato: Université Paris 1 Panthéon-Sorbonne, Centre d'Economie de la Sorbonne, Paris School of Economics, https://centredeconomiesorbonne.cnrs.fr

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: We consider a pure exchange economy with consumption externalities in preferences. We study commodity taxes and lump-sum transfers schemes, which lead to equilibrium allocations where all individuals are strictly better off. We extend the result of Geanakoplos and Polemarchakis (2008) on the generic existence of Pareto im- proving policies with uniform taxes and equal transfers to general non-separable preferences, when the number of individuals is strictly smaller than the number of commodities. We overcome this limitation by considering either uniform taxes with personalized lump-sum transfers, or personalized taxes with uniform lump-sum transfers. As in Geanakoplos and Polemarchakis (2008), we mainly use utility perturbations. We also provide the existence of Pareto improving policies for Bergson-Samuelson utilities and two-individual economies, without perturbing utilities

Keywords: Consumption externalities; commodity taxes; lump-sum transfers; Pareto improvement (search for similar items in EconPapers)
JEL-codes: D50 D60 D62 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2024-06, Revised 2025-04
New Economics Papers: this item is included in nep-mic, nep-pbe, nep-pub, nep-sea and nep-upt
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