Regulation versus taxation

Alberto Alesina and Francesco Passarelli

Journal of Public Economics, 2014, vol. 110, issue C, 147-156

Abstract: We study which policy tool and at what level a majority chooses in order to reduce activities with negative externalities. We consider three instruments: a rule, that sets an upper limit to the activity which produces the negative externality, a quota that forces a proportional reduction of the activity, and a proportional tax on it. For all instruments the majority chooses levels which are too restrictive when the activity is performed mainly by a small fraction of the population, and when costs for reducing activities or paying taxes are sufficiently convex. Also a majority may prefer an instrument different than what a social planner would choose; for instance a rule when the social planner would choose a tax.

Keywords: Externalities; Voting; Rules; Taxation (search for similar items in EconPapers)
JEL-codes: D62 D72 H23 K32 L51 P16 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: Regulation Versus Taxation (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:110:y:2014:i:c:p:147-156

DOI: 10.1016/j.jpubeco.2013.09.001

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