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Political Economy of Intermediate Goods Taxation

Author

Listed:
  • Daron Acemoglu
  • Mikhail Golosov
  • Aleh Tsyvinski

Abstract

We generalize the Diamond-Mirrlees production efficiency theorem, that there should be no taxes on sectors producing pure intermediate goods, to an environment with political economy constraints. In our economy, allocations and taxation are decided by self-interested politicians without the power to commit to future policies. The Diamond-Mirrlees production efficiency result holds even when political economy constraints introduce distortions on labor supply and capital accumulation. (JEL: H11, H21, E61, P16) (c) 2008 by the European Economic Association.

Suggested Citation

  • Daron Acemoglu & Mikhail Golosov & Aleh Tsyvinski, 2008. "Political Economy of Intermediate Goods Taxation," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 353-366, 04-05.
    • Handle: RePEc:tpr:jeurec:v:6:y:2008:i:2-3:p:353-366
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    Cited by:

    1. Fernández-Amador, Octavio & Francois, Joseph F. & Tomberger, Patrick, 2016. "Carbon dioxide emissions and international trade at the turn of the millennium," Ecological Economics, Elsevier, vol. 125(C), pages 14-26.
    2. Justin Yifu Lin & Wei Wang & Venite Zhaoyang Xu, 2021. "Catch‐up industrial policy and economic transition in China," The World Economy, Wiley Blackwell, vol. 44(3), pages 602-632, March.

    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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