Laurence Jacquet from CY Cergy Paris Université will present Tax Reforms and Production Efficiency.
Abstract
We investigate how income should be redistributed in economies where taxpayers supply multiple production factors which may be imperfect substitutes. The production sector may exhibit market imperfections and be specifically impacted by some ``production policies'' including the taxation of intermediate goods (e.g. taxing robots), public production, trade openness and competition policies. A main insight is that deviation from production efficiency does not depend on the type of production policy, its redistributive consequences, or market failures but rather on the features of the tax system. In particular, it depends on whether or not the tax system can be reformed in some specific directions, that we label ``GE-replicating'', which replicate the effects on taxpayers' supplies and utility of factor price adjustments. If reforms in the GE-replicating directions are admissible, production policies should be designed solely to enhance production possibilities. Moreover, tax incidence formulas and optimal tax formulas are only modified to correct for market imperfections. If reforms in the GE-replicating directions are not admissible, the design of production policies should also take into account their redistributive role. Moreover, tax incidence and optimal tax formulas are augmented by GE multipliers which correct for price adjustments. We illustrate these insights with practical examples, including intermediary goods taxation, Cournot duopoly scenarios, changes in trade regulations, and taxing robots.
Link to professor Jacquet's personal website: https://sites.google.com/site/econlaurencejacquet/laurence-jacquet
Contact person: Thor Olav Thoresen