Public intermediate goods and distortionary taxation |
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Authors: | Pierre Pestieau |
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Affiliation: | University of Liege, Belgium, and Cornell University, Ithaca, N.Y., U.S.A. |
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Abstract: | In the Pigovian tradition, when public intermediate goods are financed by distortionary taxation, expenditure should not be carried so far as to equate the sum of the marginal productivities with the marginal cost. This paper shows how this rule may break down when commodity taxes are used to finance public intermediate goods. |
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