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On the Difference between Optimal Public Sector Pricing and Optimal Taxation

Published online by Cambridge University Press:  17 August 2016

Knud Jørgen Munk
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Extract

The purpose of this paper is to clarify the answers given in a number of seminal public finance articles to the following questions :

  1. a) What is a proportional tax structure and when is it optimal ?

  2. b) What is the difference between the optimality conditions for optimal public sector pricing and for optimal taxation?

These issues were along with several others considered in three articles that appeared concomitantly: Lerner (1970), Baumol and Bradford (1970) and Dixit (1970), The articles were subsequently commented upon by Ng (1972), Bradford and Baumol (1972) and Sandmo (1974).

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 48 , Issue 2 , 1982 , pp. 177 - 190
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1982 

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Footnotes

*

I wish to thank Torben M. Andersen, Tony Atkinson, Avinash Dixit, Agnar Sandmo and John Weymark for helpful comments on earlier drafts of this paper.

References

Baumol, W.J. & Bradford, D.F. (1970), Optimal Departures from Marginal Cost Pricing, American Economic Review, 60, 265–283.Google Scholar
Bradford, D.F. & Baumol, W.J. (1972), Optimal Taxes and Pricing : Reply, American Economic Review, 62, 175–176.Google Scholar
Dixit, A.K. (1970), On the Optimum Structure of Commodity Taxes, American Economic Review, 60, 295–301.Google Scholar
Lerner, A.P. (1970), On Optimal Taxes with an Untaxable Sector, American Economic Review, 60, 284–294.Google Scholar
Munk, K.J. (1978), Optimal Taxation and Pure Profit, Scandinavian Journal of Economics, 80, 1–19.Google Scholar
Munk, K.J. (1980), Optimal Taxation with some Non-Taxable Commodities, Review of Economic Studies, 47, 755–765.Google Scholar
Munk, K.J. (1977), A Note on Optimal Taxation and Public Sector Pricing, Discussion Paper, Okonomisk Institut, Aarhus Universitet.Google Scholar
Ng, Y.K. (1972), Optimal Taxes and Pricing: Comment, American Economic Review, 62, 173–174.Google Scholar
Stiglitz, J.E. & Dasgupta, P. (1971), Differential Taxation, Public Goods and Economic Efficiency, Review of Economic Studies, 38, 151–174.Google Scholar
Sandmo, A. (1974), A Note on the Structure of Optimal Taxation, American Economic Review, 64, 701–706.Google Scholar