Constraints on Income Distribution and Production Efficiency In Economies with Ramsey Taxation

Charles Blackorby and Sushama Murty ()

No 271292, Economic Research Papers from University of Warwick - Department of Economics

Abstract: We study the link between second-best production efficiency and the constraints on income distribution imposed by private ownership of firms in economies with Ramsey taxation. We review the result of Dasgupta and Stiglitz [1972], Mirrlees [1972], Hahn [1973], and Sadka [1977] about firm-specific profit taxation leading to second-best production effi- ciency. Problems in the proofs of this result in these papers have been identified by Reinhorn [2005]. We provide an alternative, and with some hope a more intuitive, proof of this result. The mechanism employed in our proof is also used to show second-best production efficiency under some configuarations of private ownership without any (or at best, uniform) profit taxation. The results obtained raise questions about the genericity of the phenomenon of second-best production inefficiency and about recovering social shadow prices in such economies.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 30
Date: 2009-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://ageconsearch.umn.edu/record/271292/files/twerp_908.pdf (application/pdf)
https://ageconsearch.umn.edu/record/271292/files/twerp_908.pdf?subformat=pdfa (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:271292

DOI: 10.22004/ag.econ.271292

Access Statistics for this paper

More papers in Economic Research Papers from University of Warwick - Department of Economics
Bibliographic data for series maintained by AgEcon Search ().