Redistribution and Internalization: The Many-Person Ramsey Tax Rule Revisited

Public Finance Review, vol. 27, 541-560, (1999).

Posted: 22 Aug 2014

See all articles by Jukka Pirttila

Jukka Pirttila

United Nations - World Institute for Development Economics Research (UNU/WIDER); Tampere University of Technology

Ronnie Schöb

Freie Universitaet Berlin; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 1999

Abstract

The paper studies the trade-off between efficiency and equity objectives within a model of commodity taxation. It derives two formulations for a many-person Ramsey tax rule in the presence of externalities. The first tax rule reveals that the aggregate compensated decrease in the demand for a taxed good should be the larger, (i) the more luxurious the good and (ii) the stronger complements the taxed and the polluting good are. The second tax rule shows that the standard many-person Ramsey rule holds for the non-environmental part of a commodity tax, provided that the consumption of the polluting good is already subject to a second-best optimal internalization tax.

Keywords: optimal taxation, externalities, environmental taxes, redistribution

JEL Classification: H21, H23, Q28

Suggested Citation

Pirttila, Jukka and Schöb, Ronnie, Redistribution and Internalization: The Many-Person Ramsey Tax Rule Revisited (1999). Public Finance Review, vol. 27, 541-560, (1999).. Available at SSRN: https://ssrn.com/abstract=2484411

Jukka Pirttila (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6B
Helsinki, FIN-00160
Finland

Tampere University of Technology ( email )

P.O. 541, Korkeakoulunkatu 8 (Festia building)
Tampere, FI-33101
Finland

Ronnie Schöb

Freie Universitaet Berlin ( email )

Boltzmannstraße 20
Berlin, Berlin 14195
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Register to save articles to
your library

Register

Paper statistics

Abstract Views
115
PlumX Metrics