Logo
Munich Personal RePEc Archive

An Optimal Quantity Tax Path in a Dynamic Setting

Nawaz, Nasreen (2017): An Optimal Quantity Tax Path in a Dynamic Setting. Published in: European Journal of Government and Economics , Vol. 2, No. 6 (31 December 2017): pp. 191-225.

[thumbnail of MPRA_paper_114275.pdf]
Preview
PDF
MPRA_paper_114275.pdf

Download (249kB) | Preview

Abstract

Following Ramsey, the existing literature on optimal quantity taxation only compares the pre and the post-tax market equilibriums in order to account for the efficiency losses. However, when the government imposes a quantity tax on the consumer, the buyer’s price jumps to the pre-tax equilibrium price plus the amount of the tax, and the supply and the demand of the taxed commodity then adjust over time to bring the new post-tax market equilibrium. The existing literature does not take into account the efficiency losses during the adjustment process while computing the optimal quantity taxes. This paper derives an optimal quantity tax path in a dynamic setting minimizing the efficiency losses (output and/ or consumption lost) during the dynamic adjustment process as well as the post-tax market equilibrium.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.