K.U.Leuven, Faculty of Economics and Applied Economics : Department of Economics
CES - Dischussion Paper Series DPS 98.32 pages:1-38
The paper examines welfare improving and revenue neutral directions marginal policy reforms for an economy with nonidentical individuals and an externality that has a feedback effect on the consumption of taxed goods. It considers three types of policy instruments: the indirect taxes, the uniform poll transfer and public abatement. This extends the framework set up by Ahmad and Stern (1984), Bovenberg and de Mooij (1994) and Schöb (1996). The theoretical model is illustrated for a specific externality, namely congestion caused by peak car transport.