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Marginal Cost of Indirect Taxation in the presence of a Demerit Externality with an Application to Carbon Dioxide Emissions in Belgium

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  • B. DEFLOOR

Abstract

This paper aims to calculate marginal costs of funds (MCF) in the presence of an externality with demerit properties by using a utility scaling approach. It is an extension of a model put forward by Schroyen (2010). In the empirical section the MCF of indirect taxes in Belgium are calculated taking into account the existence of carbon dioxide emissions as demerit externality. The results reveal that scaling has a significant impact on switches in the ranking of the MCF.

Suggested Citation

  • B. Defloor, 2010. "Marginal Cost of Indirect Taxation in the presence of a Demerit Externality with an Application to Carbon Dioxide Emissions in Belgium," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 10/656, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:10/656
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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