IBE316-20 - IBE 316 Economic Policy Stiglitz Economics of...

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IBE 316 Economic Policy Stiglitz: Economics of the Public Sector Chapter 20: Optimal Taxation Keisuke OTSU Sophia University FLA Spring 2008 OTSU (Sophia University FLA) IBE 316 Spring 2008 1 / 11
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Review E¢ ciency loss associated with taxation can be measured by dead weight loss Taxation causes income and substitution e/ects income e/ect: tax reduces income that can be spent on consumption substitution e/ect: tax a/ects the relative price which shifts consumption Dead weight loss depends on the substitution e/ect high elasticity of demand means high substitution which leads to large dead weight loss E/ects of labor tax are measured by statistical techniques using market data experiments OTSU (Sophia University FLA) IBE 316 Spring 2008 2 ± 11
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Focus Questions What are the trade-o/s involved in designing a progressive income tax system? What should be the role of taxation of commodities and savings in achieving greater equity in taxation? If the government imposes taxes on di/erent commodities, how should the tax rates be set so as to minimize the total deadweight loss? OTSU (Sophia University FLA)
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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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IBE316-20 - IBE 316 Economic Policy Stiglitz Economics of...

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