London School of Economics EOPP: Economic Organisation and Public Policy Programme LSE
EOPP: Economic Organisation and Public Policy Programme

Abstract for:

Commodity Taxation and Social Welfare: The Generalised Ramsey Rule

David Coady, Jean Drze, September 2000
Paper No' DEDPS 27: | Full paper (pdf)
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Keywords: Commodity taxation; efficiency, redistribution, shadow prices

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Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: Development Economics
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Abstract:

Commodity taxes have three distinct roles: (1) revenue collection, (2) interpersonal redistribution, and (3) resource allocation. The paper presents an integrated treatment of these three concerns in a second-best general equilibrium framework, which leads to the 'generalised Ramsey rule' for optimum taxation. We show how many standard results on optimum taxation and tax reform have a straightforward counterpart in this general framework. Using this framework, we also try to clarify the notion of 'deadweight loss' as well as the relation between alternative distributional assumptions and the structure of optimum taxes.