Internalizing Externalities in Second-Best Tax Systems

Gerhard Orosel and Ronnie Schöb
Authors registered in the RePEc Author Service: Ronnie Schoeb

No 101, CESifo Working Paper Series from CESifo

Abstract: We analyze the analytical structure of optimal taxation of polluting and non-polluting goods in a second-best world where lump-sum taxes are infeasible. After deriving the environmental tax rate which exactly internalizes the external effect, we show how to separate the analysis of second-best optimal environmental taxes from the analysis of the tax structure which minimizes the excess burden. This separation reveals that standard results of optimal taxation essentially carry over to economies with externalities. Our approach clarifies the controversy regarding the relation between the first-best Pigovian tax rate on polluting goods and the optimal tax rate in a second-best world.

Date: 1995
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/ces_wp101.pdf (application/pdf)

Related works:
Journal Article: Internalizing Externalities in Second-Best Tax Systems (1996)
Working Paper: Internalizing Externalities in Second-Best Tax Systems (1996)
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:ces:ceswps:_101

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().