We consider two models of lump sum taxation in pure exchange economy in which the state imposes taxes on (or offers financial aid to) economic agents characterized by their demand functions and initial resources. In the first model the state has its own preferences and uses the collected money...

It is an important difference in different measures of the marginal cost of public funds whether to take into account the "revenue effect" emphasized by Atkinson and Stern (1974). This note tries to reconcile two competing measures from a general viewpoint. We demonstrate that the revenue effect...

This paper examines the Laffer effect in the Ramsey tax-model with linear consumption taxes and a representative consumer. It is assumed that the private goods and the public good are weakly separable. It is demonstrated that if all of the private goods are weak gross complements to each other,...

This article examines the effects of tax evasion on the cost of goods and services in an environment where input prices are homogenously taxed but evasion is intersectorially differentiated. Tax evasion raises the relative cost of producing goods and services in the sectors where evasion is more...

We analyze how vertical or horizontal fiscal equalization affects the overprovision of local public goods due to vertical fiscal externality, when there is tax evasion. The overspending incentive of regional governments is examined in the cases of fiscal equalization based on pretax earned...

The efficiency losses from taxation vary directly with the responsiveness of a government’s tax bases to tax-rate increases. We estimate the dynamic responses of tax bases to changes in tax rates using aggregate panel data from Canadian provinces over the period 1972 to 2006. Our preferred...

This paper addresses the classic question: what are the welfare costs of inflation. We employ a model in which the ratios of currency to deposits and currency to reserves are endogenously determined. The model distinguishes quantitatively between three sources of welfare cost of inflation, and...

An expression for the welfare cost of a marginal increase in the public debt is derived using a simple AK endogenous growth model. This measure of the marginal cost of public funds (MCF) can be interpreted as the marginal benefit-cost ratio that a debt-financed public project needs in order to...