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La nature duale des biens publics et de la congestion : un ré‐examen de la politique fiscale .
Author(s) -
Chatterjee Santanu,
Ghosh Sugata
Publication year - 2011
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/j.1540-5982.2011.01681.x
Subject(s) - economics , consumption tax , consumption (sociology) , fiscal policy , dual (grammatical number) , public finance , tax reform , public economics , public good , indirect tax , value added tax , monetary economics , income tax , state income tax , macroeconomics , microeconomics , literature , art , social science , sociology
The role of fiscal policy is examined when public goods provide both productive and utility services. In the presence of congestion, the consumption tax is shown to be distortionary. Optimal fiscal policy involves using consumption‐based instruments in conjunction with the income tax. An income tax‐financed increase in government spending dominates both lump‐sum and consumption tax‐financing. Replacing the lump‐sum tax with an income tax to finance a given level of spending dominates introducing an equivalent consumption tax. These results contrast sharply with the literature, where the consumption tax is generally viewed as the least distortionary source of public finance.