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Optimal Taxation of Intermediate Goods in the Presence of Externalities: A Survey Towards the Transport Sector

Joakim Ahlberg ()
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Joakim Ahlberg: VTI, Postal: VTI, Transport Economics, P.O. Box 6056, SE-171 06 Solna, Sweden, http://www.vti.se/

No 2006:3, Working Papers from Swedish National Road & Transport Research Institute (VTI)

Abstract: The paper surveys the literature on optimal taxation with emphasis on intermediate goods, or, more specific, freight (road) transport. There are two models frequently used, first, the one emanated from Diamond & Mirrlees' (1971) paper, where the production efficiency lemma made it clear that intermediate goods was not to be taxed. And, second, the Ramsey-Boiteux model where a cost-of-service regulation imposes a budget constraint for the regulated firm. In the latter model, in contrast to the first, freight transports (intermediate goods) are to be taxed in the Ramsey tradition, and thus trades the production efficiency lemma against a budget restriction. The paper also discusses welfare effects due to environmental tax reforms, with emphasis to what has become to known as the double dividend hypothesis. Finally, administrative costs in the context of optimal taxation is touched upon, a subject that is to a large degree repressed in optimal tax theory.

Keywords: Optimal Taxation; Intermediate Goods; Transport; Welfare Effects; Environmental Tax; Administrative Costs (search for similar items in EconPapers)
JEL-codes: H21 H23 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2006-06-01
New Economics Papers: this item is included in nep-acc, nep-ene, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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