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Optimal Commodity Taxation and Redistribution within Households
Author(s) -
Bargain Olivier,
Donni Olivier
Publication year - 2014
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/ecca.12055
Subject(s) - redistribution (election) , economics , commodity , consumption (sociology) , microeconomics , engel curve , agency (philosophy) , market economy , social science , philosophy , price index , epistemology , sociology , politics , political science , law
Using a collective model of consumption, we characterize optimal commodity taxes aimed at targeting specific individuals within the household. The main message is that distortionary indirect taxation can circumvent the agency problem of the household. Essentially, taxation should discourage less the consumption of a certain group of goods—those for which the slope of the Engel curves is larger for the targeted person.