Targeting taxes on local externalities

Stephane Gauthier and Fanny Henriet

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Abstract: We consider optimal anonymous consumption taxes in situations where the magnitude of an externality varies with individuals who cause it. For instance, urban fuel consumers generate greater pollution damages compared to rural consumers, but both groups are subjected to the same fuel tax. We provide a condition for the validity of the targeting principle, where external concerns are only addressed through the tax imposed on the commodity responsible for the externality. When this condition holds, one can separate the equity/efficiency and environmental components of this tax. An illustration suggests that Pigovian considerations explain most of the fuel tax in France.

Keywords: Targeting principle; Local externality; Pollution; Pigovian tax; Consumption taxes; Fuel; Budget de famille (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-ene, nep-env and nep-pbe
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04331432v1
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Published in Annals of Economics and Statistics, 2023, 151, pp.1-36. ⟨10.2307/48744149⟩

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Related works:
Journal Article: Targeting Taxes on Local Externalities (2023)
Working Paper: Targeting taxes on local externalities (2023)
Working Paper: Targeting taxes on local externalities (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04331432

DOI: 10.2307/48744149

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