Ramsey, Pigou, heterogenous agents, and non-atmospheric consumption externalities

Ron Wendner

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes the effects of non-atmospheric consumption externalities on optimal commodity taxation and on the social cost and optimal levels of public good provision. A negative consumption externality, by lowering the social cost of public good provision, may require the second-best level of public good provision to exceed the first-best level. If those households who are most important for building up the consumption reference level respond the least to commodity taxation, heterogeneity may imply an equity-efficiency tradeoff. This tradeoff is present only if the consumption externality is of the non-atmospheric type.

Keywords: consumption externality; optimal commodity taxation; Pigou; public good provision; Ramsey rule (search for similar items in EconPapers)
JEL-codes: D62 H21 H41 (search for similar items in EconPapers)
Date: 2011-11-25
New Economics Papers: this item is included in nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Ramsey, Pigou, Heterogeneous Agents, and Nonatmospheric Consumption Externalities (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:35015

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