Working Papers, Swedish National Road & Transport Research Institute (VTI)
No 2006:3:
Optimal Taxation of Intermediate Goods in the Presence of Externalities: A Survey Towards the Transport Sector
Joakim Ahlberg ()
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; (follow links to similar papers)
JEL-Codes: H21; H23; (follow links to similar papers)
43 pages, June 1, 2006
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