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Production efficiency and profit taxation

Gauthier, S; Laroque, G; (2018) Production efficiency and profit taxation. Social Choice and Welfare 10.1007/s00355-018-1144-2.

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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% , 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.

Type: Article
Title: Production efficiency and profit taxation
DOI: 10.1007/s00355-018-1144-2
Publisher version: https://doi.org/10.1007/s00355-018-1144-2
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/10053297
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