Subsidies Financed With Distorting Taxes

Edgar Browning

National Tax Journal, 1993, vol. 46, issue 2, 121-34

Abstract: Shows how familiar partial equilibrium analysis of a subsidy can be extended to take account of the marginal welfare costs of raising the necessary tax revenue. Focuses on identifying the marginal social cost (MSC) of using the subsidy to expand output which, in conjunction with marginal social benefit (MSB) of the output, determines the (second best) optimal subsidy. Looks at three types of subsidies: excise subsidy, marginal excise subsidy, and in-kind transfer.

Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:46:y:1993:i:2:p:121-34

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