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A Reinterpretation of Elasticity Formulae in Optimum Tax Theory

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  • Sandmo, Agnar

Abstract

This paper presents a unified interpretation of three special cases which have been widely discussed in the theory of optimum taxation. These are the Corlett-Hague case and two versions of the inverse elasticity rule, derived on the assumption that either the compensated or the uncompensated cross elasticities of demand are zero. It is demonstrated that all three cases imply that it is the compensated elasticities which determine efficient tax differentiation, and that complementarity with the untaxed numeraire, emphasized by W. J. Corlett and D. C. Hague (1953-54), plays a role in the interpretation of all three cases. Copyright 1987 by The Review of Economic Studies Limited.

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  • Sandmo, Agnar, 1987. "A Reinterpretation of Elasticity Formulae in Optimum Tax Theory," Economica, London School of Economics and Political Science, vol. 54(213), pages 89-96, February.
    • Handle: RePEc:bla:econom:v:54:y:1987:i:213:p:89-96
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    Cited by:

    1. Junichi Minagawa & Thorsten Upmann, 2018. "Optimal taxation under a consumption target," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 50(4), pages 663-676, April.
    2. Stefan Homburg, 2004. "A New Approach to Optimal Commodity Taxation," CESifo Working Paper Series 1231, CESifo.
    3. Wrede, Matthias, 1998. "Pareto efficiency of the pay-as-you-go pension system in a three-period-OLG model," BERG Working Paper Series 27, Bamberg University, Bamberg Economic Research Group.
    4. Ed Westerhout & Kees Folmer, 2007. "Co-payment systems in health care; between moral hazard and risk reduction," CPB Discussion Paper 78.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Bjørn Sandvik, 2003. "Optimal Taxation and Normalisations," CESifo Working Paper Series 1025, CESifo.
    6. Martin Werding, 2005. "Survivor Benefits and the Gender Tax Gap in Public Pension Schemes: Observations from Germany," CESifo Working Paper Series 1596, CESifo.
    7. Lim Jean & Rodríguez-Zamora Carolina, 2010. "The Optimal Tax Rule in the Presence of Time Use," Working Papers 2010-05, Banco de México.
    8. Robert Fenge & Silke Uebelmesser & Martin Werding, 2002. "Second-best Properties of Implicit Social Security Taxes: Theory and Empirical Evidence," CESifo Working Paper Series 743, CESifo.
    9. Wrede Matthias, 1999. "Pareto Efficient Pay-as-you-go Pension Systems with Multi-Period Lives / Pareto-effiziente umlagefinanzierte Alterssicherungssysteme bei mehrperiodigem Arbeitsleben," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 219(3-4), pages 494-503, June.
    10. Martin Werding, 2005. "Survivor Benefits and the Gender Tax-Gap in Public Pension Schemes Work Incentives and Options for Reform," ifo Working Paper Series 7, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    11. Stefan Homburg, 2006. "A New Approach to Optimal Commodity Taxation," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(3), pages 323-338, September.
    12. Werding Martin, 2008. "Survivor Benefits and the Gender-Related Tax Differential in Public Pension Schemes: Observations from Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(1), pages 110-134, February.
    13. David Coady & Jean Drèze, 2002. "Commodity Taxation and Social Welfare: The Generalized Ramsey Rule," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 9(3), pages 295-316, May.
    14. Ed Westerhout & Kees Folmer, 2007. "Co-payment systems in health care; between moral hazard and risk reduction," CPB Discussion Paper 78, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Eliasson, Jonas & Börjesson, Maria, 2022. "Costs and benefits of parking charges in residential areas," Transportation Research Part B: Methodological, Elsevier, vol. 166(C), pages 95-109.
    16. Jean Dreze & David Coady, 2010. "Commodity Taxation and Social Welfare : The Generalised Ramsey Rule," Working Papers id:2936, eSocialSciences.
    17. Robert Fenge & Silke Uebelmesser & Martin Werding, 2006. "On the Optimal Timing of Implicit Social Security Taxes Over the Life Cycle," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(1), pages 68-107, March.

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