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On the Generalised Anti-inverse Elasticity Rule: An Existence Result

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  • Junichi Minagawa
  • Thorsten Upmann

Abstract

We consider an optimal commodity taxation problem under a consumption target and prove the existence of an optimal solution for the problem. This optimal solution obeys taxation rules that are contrary to standard taxation rules such as the inverse-elasticity rule. We also verify the necessary and sufficient condition for the optimal solution to exhibit uniform pricing.

Suggested Citation

  • Junichi Minagawa & Thorsten Upmann, 2018. "On the Generalised Anti-inverse Elasticity Rule: An Existence Result," CESifo Working Paper Series 7041, CESifo.
    • Handle: RePEc:ces:ceswps:_7041
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    References listed on IDEAS

    as
    1. Sandmo, Agnar, 1974. "A Note on the Structure of Optimal Taxation," American Economic Review, American Economic Association, vol. 64(4), pages 701-706, September.
    2. 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.
    3. Dixit, Avinash K., 1990. "Optimization in Economic Theory," OUP Catalogue, Oxford University Press, edition 2, number 9780198772101.
    4. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    5. Sadka, Efraim, 1977. "A theorem on uniform taxation," Journal of Public Economics, Elsevier, vol. 7(3), pages 387-391, June.
    6. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    anti-inverse elasticity rule; consumption target; existence of an optimal solution; optimal commodity taxation; uniform pricing;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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