Data and Code for: The Welfare Impact of Second-Best Uniform Pigouvian Taxation

Principal Investigator(s): View help for Principal Investigator(s) Christopher Knittel, MIT; Ryan Sandler, Consumer Financial Protection Bureau

Version: View help for Version V1

Name	File Type	Size	Last Modified
2016-0508_code			02/26/2020 03:29:PM
2016-0508_data			03/05/2020 03:00:PM
2016-0508_readme.docx	application/vnd.openxmlformats-officedocument.wordprocessingml.document	18.7 KB	02/26/2020 10:29:AM
2016-0508_readme.pdf	application/pdf	565.7 KB	04/03/2020 04:51:PM

Project Citation:

Knittel, Christopher, and Sandler, Ryan. Data and Code for: The Welfare Impact of Second-Best Uniform Pigouvian Taxation. Nashville, TN: American Economic Association [publisher], 2020. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2020-04-07. https://doi.org/10.3886/E117942V1

Project Description

Summary: When consumers or firms don't face the true social cost of their actions, market outcomes are inefficient. In the case of negative externalities, Pigouvian taxes are one way to correct this market failure, but it may be infeasible to tax the externality directly. The alternative, taxing a related product, will be second-best. In this paper, we show that in the presence of heterogeneous externalities and elasticities, this type of indirect tax performs poorly. In our empirical application, gasoline taxes to address pollution externalities, less than a third of the deadweight loss of the externality is addressed by second-best optimal taxes.

Scope of Project

JEL Classification:
      D62 Externalities
      H21 Taxation and Subsidies: Efficiency; Optimal Taxation
      H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
      H71 State and Local Taxation, Subsidies, and Revenue
      H76 State and Local Government: Other Expenditure Categories
      Q53 Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
      R48 Transportation Economics: Government Pricing and Policy

Geographic Coverage: California, United States of America

Time Period(s): 1996 – 2010

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V1 [2020-04-07]

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