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On Atmosphere Externality and Corrective Taxes

Eytan Sheshinski ()

Discussion Paper Series from The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem

Abstract: It has been argued that in the presence of an ’Atmosphere Externality’ and competitive behavior by households, a uniform commodity tax on the externality - generating good attains the first best. It is demonstrated, however, that if income redistribution is desirable then personalized taxes are required for a second-best optimum. Each of these taxes is the sum of a uniform (across households) tax and a component, positive or negative, which depends on the household’s income and demand elasticities. Second-best optimal indirect taxes and rules for investment in externality-reducing measures are also considered.

Keywords: atmosphere externality; optimal taxation; disributional considerations (search for similar items in EconPapers)
JEL-codes: H21 H23 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2002-02
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (2) Track citations by RSS feed

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Journal Article: On atmosphere externality and corrective taxes (2004) Downloads
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