Several studies show cases where the Samuelson rule holds, or where the marginal cost of public funds (MCF) equals one within optimized tax systems. The conditions for the original Samuelson rule to hold in these studies are quite restrictive, and MCF measures employed are not consistent with...

The paper uses an applied general equilibrium model, calibrated to the situation in Belgium in 1990, to evaluate the welfare effects of small policy changes in the presence of transport externalities. The model incorporates three types of externalities: congestion, which has a feedback effect on...

The marginal cost of public funds is the equilibrium price at the intersection of the appropriately-defined demand curve for and the supply curve of public expenditure. In a world with identical people and with no excess burden of taxation, that price would have to be 1. Otherwise the median...

This paper extends the Mirrlees (1971) model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities. It is demonstrated that the optimal second-best tax on an externality-generating good should not be corrected for the marginal cost of public...

There still seems to be some confusion about the consequences of normalisations in the optimal taxation literature. We claim that:1) Normalisations do not matter for the real solution of optimal taxation problem.2) Normalisations do matter for good characterisations of the solutions to optimal...

Recent estimates of the marginal cost of public funds differ substantially. Some studies argue that the efficiency cost of taxation counter the welfare gain connected to redistribution of income. Hence, the efficiency cost of taxation should not be included as a cost of public goods provision....

The paper shows that the marginal cost of public funds (MCF) does not depend on whether public revenue is collected by taxation of consumer goods or income from factors supplied by households on the market. Atkinson and Stern (1974) concluded in their seminal paper that “[...] whether the...