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Commodity taxation and social welfare: the generalised Ramsey rule

Coady, David and Dreze, Jean (2000) Commodity taxation and social welfare: the generalised Ramsey rule. DEDPS, 27. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.

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Abstract

Commodity taxes have three distinct roles: (1) revenue collection, (2) interpersonal redistribution, and (3) resource allocation. The paper presents an integrated treatment of these three concerns in a second-best general equilibrium framework, which leads to the 'generalised Ramsey rule' for optimum taxation. We show how many standard results on optimum taxation and tax reform have a straightforward counterpart in this general framework. Using this framework, we also try to clarify the notion of 'deadweight loss' as well as the relation between alternative distributional assumptions and the structure of optimum taxes.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk
Additional Information: © 2000 David Coady and Jean Dreze
Library of Congress subject classification: H Social Sciences > HV Social pathology. Social and public welfare. Criminology
H Social Sciences > HJ Public Finance
Journal of Economic Literature Classification System: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency; Optimal Taxation
Sets: Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 27
Date Deposited: 08 Jul 2008 08:40
URL: http://eprints.lse.ac.uk/6651/

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