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On commodity tax harmonization and public goods provision

Author

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  • Christos Kotsogiannis
  • Miguel‐Angel Lopez‐Garcia

Abstract

This paper argues that Pareto improvements based on harmonizing tax reforms expressed in terms of the divergence between actual and optimal tax structures and over/under provision of public goods require the use of ‘pseudo‐optimal’ taxes instead of optimal ones. ‘Pseudo‐optimal’ taxes are defined as those obtained using the optimal tax formulas but evaluated at any arbitrary initial tax structure. Within this context the paper reconfirms existing results showing that tax harmonization emerges as a strong policy instrument in achieving a potential Pareto‐improvement.

Suggested Citation

  • Christos Kotsogiannis & Miguel‐Angel Lopez‐Garcia, 2021. "On commodity tax harmonization and public goods provision," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(6), pages 1220-1227, December.
    • Handle: RePEc:bla:jpbect:v:23:y:2021:i:6:p:1220-1227
    DOI: 10.1111/jpet.12535
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    References listed on IDEAS

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    1. Keen, Michael & Lahiri, Sajal & Raimondos-Moller, Pascalis, 2002. "Tax principles and tax harmonization under imperfect competition: A cautionary example," European Economic Review, Elsevier, vol. 46(8), pages 1559-1568, September.
    2. Michael Keen & David Wildasin, 2004. "Pareto-Efficient International Taxation," American Economic Review, American Economic Association, vol. 94(1), pages 259-275, March.
    3. Lucas, Vander, 2001. "Tax harmonisation and the origin principle," Economics Letters, Elsevier, vol. 71(1), pages 111-115, April.
    4. Lockwood, Ben, 1997. "Can international commodity tax harmonisation be Pareto-improving when governments supply public goods?," Journal of International Economics, Elsevier, vol. 43(3-4), pages 387-408, November.
    5. Keen, Michael, 1987. "Welfare effects of commodity tax harmonisation," Journal of Public Economics, Elsevier, vol. 33(1), pages 107-114, June.
    6. Ourania Karakosta & Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2014. "Indirect tax harmonization and global public goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(1), pages 29-49, February.
    7. Turunen-Red, Arja H & Woodland, Alan D, 1990. "Multilateral Reform of Domestic Taxes," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 160-186, January.
    8. Christos Kotsogiannis & Miguel-Angel Lopez-Garcia, 2007. "Imperfect competition, indirect tax harmonization and public goods," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(2), pages 135-149, April.
    9. Delipalla, Sophia, 1997. "Commodity tax harmonisation and public goods," Journal of Public Economics, Elsevier, vol. 63(3), pages 447-466, February.
    10. Abe, Kenzo, 1992. "Tariff Reform in a Small Open Economy with Public Production," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 209-222, February.
    11. Keen, Michael, 1989. "Pareto-improving indirect tax harmonisation," European Economic Review, Elsevier, vol. 33(1), pages 1-12, January.
    12. Lahiri, Sajal & Raimondos-Moller, Pascalis, 1998. "Public good provision and the welfare effects of indirect tax harmonisation," Journal of Public Economics, Elsevier, vol. 67(2), pages 253-267, February.
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    Cited by:

    1. Rabah Amir & Myrna Wooders, 2021. "Introduction to the special issue on markets, policies, and economic design: Theory and experiments," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(5), pages 765-771, October.

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