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Optimal taxation in the presence of a congested public good and an application to transport policy

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  • MUNK, Knud J.

    (Université catholique de Louvain)

Abstract

In this paper we demonstrate that even if policies prior to reform have been rational, it is possible, in fact in certain policy areas likely, that a green tax reform, contrary to the perceived wisdom among economists, will be associated with a double-dividend, i.e. with both environmental and fiscal benefits. We first establish this theoretically by avoiding imposing potentially unrealistic separability assumptions, and by recognising that taxation involves administrative costs. To illustrate our theoretical results, we use graphical tools well-known from fishery economics to assess the effects of the introduction of a tax on road transport.

Suggested Citation

  • MUNK, Knud J., 2011. "Optimal taxation in the presence of a congested public good and an application to transport policy," LIDAM Discussion Papers CORE 2011057, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2011057
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2011.html
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    References listed on IDEAS

    as
    1. Fleurbaey,Marc & Maniquet,François, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521715348, January.
    2. Inge Mayeres & Stef Proost, 1997. "Optimal Tax and Public Investment Rules for Congestion Type of Externalities," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 261-279, June.
    3. Knud Munk, 2000. "Assessment of the Introduction of Road Pricing Using a Computable General Equilibrium Model," Regional and Urban Modeling 283600065, EcoMod.
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    5. Dixit, Avinash, 1975. "Welfare effects of tax and price changes," Journal of Public Economics, Elsevier, vol. 4(2), pages 103-123, February.
    6. Knud J. Munk, 2008. "Evaluation of the Introduction of Road Pricing Using a Computable General Equilibrium Model," Advances in Spatial Science, in: Chris Jensen-Butler & Birgitte Sloth & Morten Marott Larsen & Bjarne Madsen & Otto Anker Nielsen (ed.), Road Pricing, the Economy and the Environment, chapter 9, pages 167-191, Springer.
    7. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-1089, September.
    8. A. Bovenberg, 1999. "Green Tax Reforms and the Double Dividend: an Updated Reader's Guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 421-443, August.
    9. Duranton, Gilles & Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2010. "The Economics of Clusters: Lessons from the French Experience," OUP Catalogue, Oxford University Press, number 9780199592203.
    10. Belleflamme,Paul & Peitz,Martin, 2010. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9780521681599, November.
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    12. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 157-183, August.
    13. repec:bla:scandj:v:80:y:1978:i:1:p:1-19 is not listed on IDEAS
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    Cited by:

    1. Nakabayashi, Masanari, 2010. "Optimal tax rules and public sector efficiency with an externality in an overlapping generations model," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1028-1040, December.

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    More about this item

    Keywords

    optimal taxation; congested public goods; externalities; administrative costs; green tax reform; double-dividend; transport policy; cost-benefit criteria;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other

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