A New Approach to Optimal Commodity Taxation

Stefan Homburg

No 1231, CESifo Working Paper Series from CESifo

Abstract: This paper makes a fresh attempt at characterizing optimal commodity taxes. Under the usual assumptions, an extremely simple expression of second-best commodity taxes is derived, showing tax rates as functions of observable variables only, rather than as functions of unobservable variables such as compensated cross elasticities. The main formula is independent of special preferences, and independent of the number of commodities. It has a simple economic meaning and could be particularly useful for empirical research. Examples and remarks on the normalization problem are provided.

Keywords: optimal commodity taxation; Ramsey rule (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-pbe and nep-pub
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Citations: View citations in EconPapers (3)

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