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Ramsey, Pigou, heterogenous agents, and non-atmospheric consumption externalities

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  • Wendner, Ronald
Abstract
This paper analyzes the effects of non-atmospheric consumption externalities on optimal commodity taxation and on the social cost and optimal levels of public good provision. A negative consumption externality, by lowering the social cost of public good provision, may require the second-best level of public good provision to exceed the first-best level. If those households who are most important for building up the consumption reference level respond the least to commodity taxation, heterogeneity may imply an equity-efficiency tradeoff. This tradeoff is present only if the consumption externality is of the non-atmospheric type.

Suggested Citation

  • Wendner, Ronald, 2011. "Ramsey, Pigou, heterogenous agents, and non-atmospheric consumption externalities," MPRA Paper 35015, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:35015
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    Cited by:

    1. Thomas Aronsson & Sugata Ghosh & Ronald Wendner, 2023. "Positional preferences and efficiency in a dynamic economy," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 61(2), pages 311-337, August.
    2. Stéphane Gauthier & Fanny Henriet, 2018. "A Fuel Tax Decomposition When Local Pollution Matters," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01826330, HAL.
    3. Aronsson, Thomas & Johansson-Stenman, Olof, 2016. "Inequality Aversion and Marginal Income Taxation," Working Papers in Economics 673, University of Gothenburg, Department of Economics.
    4. Eckerstorfer, Paul & Wendner, Ronald, 2013. "Asymmetric and non-atmospheric consumption externalities, and efficient consumption taxation," Journal of Public Economics, Elsevier, vol. 106(C), pages 42-56.
    5. Aronsson, Thomas & Johansson-Stenman, Olof, 2014. "State-variable public goods and social comparisons," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 390-410.
    6. Evangelos V. Dioikitopoulos & Stephen J. Turnovsky & Ronald Wendner, 2020. "Dynamic Status Effects, Savings, And Income Inequality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(1), pages 351-382, February.
    7. Paul Eckerstorfer, 2014. "Relative Consumption Concerns and the Optimal Tax Mix," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(6), pages 936-958, December.
    8. Aronsson, Thomas & Johansson-Stenman, Olof, 2015. "Keeping up with the Joneses, the Smiths and the Tanakas: On international tax coordination and social comparisons," Journal of Public Economics, Elsevier, vol. 131(C), pages 71-86.
    9. Stéphane Gauthier & Fanny Henriet, 2018. "A Fuel Tax Decomposition When Local Pollution Matters," PSE Working Papers halshs-01826330, HAL.
    10. Laszlo Goerke & Michael Neugart, 2021. "Social preferences, monopsony and government intervention," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(2), pages 864-891, May.
    11. Van Long, Ngo & McWhinnie, Stephanie F., 2012. "The tragedy of the commons in a fishery when relative performance matters," Ecological Economics, Elsevier, vol. 81(C), pages 140-154.
    12. Heikkinen, T., 2015. "(De)growth and welfare in an equilibrium model with heterogeneous consumers," Ecological Economics, Elsevier, vol. 116(C), pages 330-340.
    13. Aronsson, Thomas & Johansson-Stenman, Olof, 2014. "Positional preferences in time and space: Optimal income taxation with dynamic social comparisons," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 1-23.
    14. Wendner, Ronald & Ghosh, Sugata, 2017. "Positional Preferences: Efficiency and Distortions under Welfarist- and Paternalistic Governments," MPRA Paper 77839, University Library of Munich, Germany.
    15. Francisco Alvarez‐Cuadrado & Mayssun El‐Attar Vilalta, 2018. "Income Inequality and Saving," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 80(6), pages 1029-1061, December.

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    More about this item

    Keywords

    consumption externality; optimal commodity taxation; Pigou; public good provision; Ramsey rule;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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