公共政策的经济分析(英文)Chap13-Taxation-and-Efficiency课件.ppt

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1、Chapter 13 Taxation and Efficiency1IntroductionAre people unaffected by a tax increase if they pay zero in taxes afterwards?No,consumption may have changed in response to the tax increaseBundle consumed is less desirableExcess burden is a loss of welfare above and beyond the tax revenues collected.2

2、Excess Burden DefinedTwo commoditiesBarley and cornFixed incomePb and Pc are prices of goodsNo distortions such as externalities,imperfect competition,public goods,etc.3Excess Burden DefinedFigure 13.1 shows the budget constraint(AD),with utility maximized at bundle E1.Ad-valorem tax levied on barle

3、y at rate tb raises the price to(1+tb)Pb,and rotates the budget constraint along the x-axis.The new budget constraint is AF.4Excess Burden DefinedAt each consumption level of barley,the vertical distance between AD and AF shows tax payments in terms of forgone corn.Normalize Pc=$1 so that vertical d

4、istance can be measured in either quantity of corn or dollars.6Excess Burden DefinedFigure 13.2 shows new optimizing choice with the higher prices along budget constraint AF.Utility maximized at bundle E2.Vertical distance between old&new budget constraints is GE2 is the“tax bill.”7Excess Burden Def

5、inedAny tax will lower utility,but is there an alternative tax that raises the same revenue,GE2,but entails a smaller utility loss?Or greater revenue with the same utility loss?If so,the tax on barley leads to excess burden.8Excess Burden DefinedEquivalent variation is the amount of income we would

6、have to take away(before any tax was imposed)to induce a move to the lower indifference curve.Taking away income is equivalent to a parallel movement inward on the budget constraint.Budget constraint HI in Figure 13.3 shows this.10Figure 13.311Excess Burden DefinedLump sum tax is a tax that must be

7、paid regardless of the taxpayers behavior.Budget constraint HI satisfies this.Revenue yield exactly equals the equivalent variation.Conclusion:Lump sum tax has no excess burden.13Questions and AnswersIntuitively,when MRSMRT the marginal utility of substituting barley consumption for corn consumption

8、 exceeds the change in production costs from doing so.In the presence of the tax,there is no financial incentive to do so.15Questions and AnswersIntuitively,when MRSMRT the marginal utility of substituting barley consumption for corn consumption exceeds the change in production costs from doing so.I

9、n the presence of the tax,there is no financial incentive to do so.16Figure 13.418Questions and AnswersIn Figure 13.4,the ordinary(uncompensated)demand curve is inelastic B1=B2 when the price increases.But this is because the income effect offsets the substitution effect.The substitution effect is t

10、he part necessary to compute excess burden.The compensated demand curve(which holds utility constant as prices change)is the relevant one,and the elasticity for it is non-zero.19Excess Burden Measurement with Demand CurvesConsider a compensated demand curve,such as the one in Figure 13.5.Impose an a

11、d-valorem tax on barley,so that its price increases to(1+tb)Pb.Equivalent to the supply curve shifting upward.20Figure 13.521Excess Burden Measurement with Demand CurvesExcess burden equal to triangle fid.Through some mathematical manipulation,this can be expressed as:22Differential Taxation of Inpu

12、tsSome inputs are taxed differently depending on where they are used:Capital used in the corporate sector is subject to a higher tax rate than capital used in the noncorporate sector.Labor used in the household is untaxedFigure 13.8 measures the efficiency cost24Figure 13.825Differential Taxation of

13、 InputsIn this figure,total amount of labor is fixed at OO.Moving along the x-axis simply shifts labor from the labor market to the household sector.VMP is the value of marginal product,or the dollar value of the additional input produced from an hour of work.VMP declines with hours worked in a sect

14、or.Optimal allocation of hours equates margins,such that OH*is spent in household production,and OH*is spent in the market.26Figure 13.928Differential Taxation of InputsPeople shift hours into non-market work.Household production increases from OH*to OHt,while market work decreases from OH*to OHt.Excess burden equal to abe.29