The welfare impact of second-best uniform-Pigouvian taxation : evidence from transportation by Christopher R. Knittel and Ryan Sandler
By: Knittel, Christopher R
.
Contributor(s): Sandler, Ryan.
Material type: 
ArticlePublisher: 2018Subject(s): IMPUESTOS INDIRECTOS | EXTERNALIDADES | IMPOSICION OPTIMAOnline resources: Click here to access online
In:
American Economic Journal. Economic Policy v. 10, n. 4, November 2018, p. 211-242Summary: When consumers or firms don’t face the true social cost of their
actions, market outcomes are inefficient. In the case of negative externalities, Pigouvian taxes are one way to correct this market failure, but it may be infeasible to tax the externality directly. The alternative, taxing a related product, will be second-best. In this paper, we show that in the presence of heterogeneous externalities and elasticities, this type of indirect tax performs poorly. In our empirical application, gasoline taxes to address pollution externalities, less than a third of the deadweight loss of the externality is addressed by second-best optimal taxes.
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| OP 2135/2018/3-2 Consumer valuation of fuel costs and tax policy: | OP 2135/2018/4 American Economic Journal : Economic Policy | OP 2135/2018/4-1 Can small incentives have large effects? | OP 2135/2018/4-2 The welfare impact of second-best uniform-Pigouvian taxation | OP 2135/2018/4-3 Taxes and US oil production | OP 2135/2019/1 American Economic Journal : Economic Policy | OP 2135/2019/1-1 Who really benefits from consumption tax cuts ? |
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Resumen.
Bibliografía.
When consumers or firms don’t face the true social cost of their
actions, market outcomes are inefficient. In the case of negative externalities, Pigouvian taxes are one way to correct this market failure, but it may be infeasible to tax the externality directly. The alternative, taxing a related product, will be second-best. In this paper, we show that in the presence of heterogeneous externalities and elasticities, this type of indirect tax performs poorly. In our empirical application, gasoline taxes to address pollution externalities, less than a third of the deadweight loss of the externality is addressed by second-best optimal taxes.
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