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Constraints on income distribution and production efficiency in economies with Ramsey Taxation
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Blackorby, Charles and Murty, Sushama (2009) Constraints on income distribution and production efficiency in economies with Ramsey Taxation. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.908).
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Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
We study the link between second-best production efficiency and the constraints on income distribution imposed by private ownership of firms in economies with Ramsey taxation. We review the result of Dasgupta and Stiglitz [1972], Mirrlees [1972], Hahn [1973], and Sadka [1977] about firm-specific profit taxation leading to second-best production efficiency. Problems in the proofs of this result in these papers have been identified by Reinhorn [2005]. We provide an alternative, and with some hope a more intuitive, proof of this result. The mechanism employed in our proof is also used to show second-best production efficiency under some configuarations of private ownership without any (or at best, uniform) profit taxation. The results obtained raise questions about the genericity of the phenomenon of second-best production inefficiency and about recovering social shadow prices in such economies.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | H Social Sciences > HJ Public Finance | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Taxation -- Econometric models, Production (Economic theory), Equilibrium (Economics), Right of property | ||||
Series Name: | Warwick economic research papers | ||||
Publisher: | University of Warwick, Department of Economics | ||||
Place of Publication: | Coventry | ||||
Official Date: | 15 May 2009 | ||||
Dates: |
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Number: | No.908 | ||||
Number of Pages: | 30 | ||||
Status: | Not Peer Reviewed | ||||
Access rights to Published version: | Open Access (Creative Commons) |
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