This paper re-examines the optimal tax design problem (income and commodities) in the presence of externalities. The … expressions for the optimal tax on private goods; (ii) externalities do not affect commodity tax formulas (linear and nonlinear …) for private goods; (iii) externalities do not affect the income tax structure if commodity taxes are nonlinear and affect …

extend Rosen's model, we analyze the case of positive externalities associated with child quality. The positive externality …