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Production Efficiency and Profit Taxation

Stephane Gauthier and Guy Laroque

PSE Working Papers 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. This note shows 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.

Keywords: optimal taxation; taxation of profits; production efficiency (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-pbe and nep-pub
Date: 2017-10
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01622337
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Related works:
Journal Article: Production efficiency and profit taxation (2019) Downloads
Working Paper: Production efficiency and profit taxation (2019)
Working Paper: Production efficiency and profit taxation (2018) Downloads
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