Optimal Taxation and Multiple Externalities in a Dynamic Economy

• This paper characterizes the optimal mix of linear commodity taxation and non-linear income taxation in a dynamic economy where consumption gives rise to positional and environmental externalities. Both externalities are modeled as stock-externalities by reflecting people's present and past consumption. With non-atmospheric positional externalities, the principle of targeting does not apply, which means that the policy rules for all tax instruments are adjusted in response to the positional externality. The results of the model imply simultaneous motives for corrective taxation that interacts in an important way.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Optimal mixed taxation

Stock externalities

Relative consumption concerns

Environmental externality

Economics

Nationalekonomi

Publication and Content Type

vet (subject category)

ovr (subject category)