In a second best environment, the optimal policy choice sometimes follows the first best rules. This note lays down the information structure and separability assumptions under which this property holds in a variety of setups. -- separability ; second best optimality ; indirect taxes ; Samuelson...

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...