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Optimal sin taxes in the presence of income taxes and health care

Marsiliani, L.; Renstrom, T.I.; Wang, J.

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Authors

J. Wang



Abstract

We present a unified approach to analyze sin taxes, by allowing for a non-paternalistic view, stemming from crowding-out externalities, in addition to the paternalistic view. Analytical results show the additive property between the Pigouvian and the efficiency elements in optimal sin taxes. The Pigouvian element can be decomposed into externality components additively. Although the Pigouvian elements are lower in the second-best, the second-best optimal sin taxes are not necessarily lower due to the presence of the efficiency element. Calibration results show that the implementation of sin taxes has double-dividends, which improve not only health but also economic performance and welfare.

Citation

Marsiliani, L., Renstrom, T., & Wang, J. (2020). Optimal sin taxes in the presence of income taxes and health care. Economics Letters, 186, Article 108767. https://doi.org/10.1016/j.econlet.2019.108767

Journal Article Type Article
Acceptance Date Oct 15, 2019
Online Publication Date Oct 23, 2019
Publication Date Jan 1, 2020
Deposit Date Oct 16, 2019
Publicly Available Date Apr 23, 2021
Journal Economics Letters
Print ISSN 0165-1765
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 186
Article Number 108767
DOI https://doi.org/10.1016/j.econlet.2019.108767
Public URL https://durham-repository.worktribe.com/output/1282689

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