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Production efficiency and profit taxation

Stephane Gauthier and Guy Laroque

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: Consider a simple general equilibrium economy with one representative consumer, a single competitive firm and the government. Suppose that the government has to finance public expenditures using linear consumption taxes and/or a lump-sum tax on profits redistributed to the consumer. We show that, if the tax rate on profits cannot exceed 100 percent, one cannot improve upon the second-best optimum of an economy with constant returns to scale by using a less efficient profit-generating decreasing returns to scale technology.

Date: 2019-02
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Published in Social Choice and Welfare, 2019, 52 (2), pp.215-223. ⟨10.1007/s00355-018-1144-2⟩

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Working Paper: Production Efficiency and Profit Taxation (2017) Downloads
Working Paper: Production Efficiency and Profit Taxation (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-01884350

DOI: 10.1007/s00355-018-1144-2

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