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A note on Ramsey and Corlett-Hague rules

Eduardo Ley

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: Ramsey-type results dictate that an optimal pattern of taxes must tax more heavily those goods which have a more inelastic(compensated)demand. Corlett and Hague (1953) investigated the optimal revenue-neutral movements from an initial uniform tax. They obtained that the goods (relatively) more complementary to the untaxed good (leisure)should see their taxes increased-which in a revenue-neutral seeting implies that the other goods see their taxes disminished. In a three-good economy (with only two goods being subject to taxation) the Ramsey-type rule and the Corlett-Hague result can be easily related.

Keywords: Optimal; taxation; Ramsey; Corlett-Hague; Demand; elasticity (search for similar items in EconPapers)
Date: 1992-04
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