Implementing optimal taxes using tradable share permits

Helge Berglann

Journal of Environmental Economics and Management, 2012, vol. 64, issue 3, 402-409

Abstract: This paper presents a simple system for efficient regulation under asymmetric information. Each firm's income is controlled by a tax that depends on the firm's own output and on a parameter construed as a share permit. These “shares of total expected output” lower a firm's tax burden and are acquired in a competitive market. By employing this scheme, the planner only requires knowledge of marginal damage to induce the first-best outcome. Relative to a traditional cap-and-trade approach the system increases expected social welfare.

Keywords: Asymmetric information; Taxation; Tradable permits (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:64:y:2012:i:3:p:402-409

DOI: 10.1016/j.jeem.2012.04.005

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