IBE316-19 - IBE 316 Economic Policy Stiglitz Economics of...

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IBE 316 Economic Policy Stiglitz: Economics of the Public Sector Chapter 19: Taxation and Economic E¢ cency Keisuke OTSU Sophia University FLA Spring 2008 OTSU (Sophia University FLA) IBE 316 Spring 2008 1 / 14
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Announcement Schedule of Classes Tuesday 15th: Chapter 20 Friday 18th: Cancelled Tuesday 22nd: Final review OTSU (Sophia University FLA) IBE 316 Spring 2008 2 / 14
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Review When we analyze the impact of taxes on individuals, we should consider the tax incidence Tax incidence depends on elasticities of demand and supply of the taxed good Two di/erent tax systems are equivalent when their incidences are the same The US income tax is progressive in terms of incidence OTSU (Sophia University FLA) IBE 316 Spring 2008 3 ± 14
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Overview Focus Questions How is e¢ ciency loss associated with taxation measured? What is meant by the income and substitution e/ects of tax? How large are the e¢ ciency losses associated with taxes on labor and savings? OTSU (Sophia University FLA) IBE 316 Spring 2008 4 ± 14
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E/ect of Taxes Borne by Consumers Substitution and Income E/ects Income e/ect: an increase in tax leaves an individual with less money to spend Substitution e/ect:consumption of the taxed good is reduced because of the increased relative price the magnitude of the substitution e/ect depends on how easy it is to substitute other goods for the taxed good OTSU (Sophia University FLA) IBE 316 Spring 2008 5 ± 14
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This note was uploaded on 10/22/2011 for the course ECON 316 taught by Professor Keisukeotsu during the Spring '08 term at Sophia University.

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IBE316-19 - IBE 316 Economic Policy Stiglitz Economics of...

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