Production efficiency and profit taxation
Journal article: Consider a simple general equilibrium economy with one representative consumer, a single competitive firm and the government. Suppose that the government has to finance public expenditures using linear consumption taxes and/or a lump-sum tax on profits redistributed to the consumer. We show that, if the tax rate on profits cannot exceed 100 percent, one cannot improve upon the second-best optimum of an economy with constant returns to scale by using a less efficient profit-generating decreasing returns to scale technology.
Author(s)
Stéphane Gauthier, Guy Laroque
Journal
- Social Choice and Welfare
Date of publication
- 2019
Keywords JEL
Pages
- 215–223
URL of the HAL notice
Version
- 1
Volume
- 52