Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/qed/wpaper/500.html
   My bibliography  Save this paper

Moral Hazard and Optimal Commodity Taxation

Author

Listed:
  • Richard Arnott
  • Joseph Stiglitz
Abstract
The central result of this paper is that when moral hazard is present, shadow prices in general differ from market prices. To remedy this market failure, the government should introduce differential commodity taxation. Moral hazard causes people to take too little care to prevent accidents. The corresponding deadweight loss can be reduced by subsidizing (taxing) those goods the consumption of which encourages (discourages) accident avoidance. At the constrained optimum, the sum of the deadweight losses and differential commodity taxation is minimized. Policy implications are derived and discussed.

Suggested Citation

  • Richard Arnott & Joseph Stiglitz, 1982. "Moral Hazard and Optimal Commodity Taxation," Working Paper 500, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:500
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Joseph E. Stiglitz, 1974. "Incentives and Risk Sharing in Sharecropping," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(2), pages 219-255.
    2. Stiglitz, Joseph E., 1982. "Utilitarianism and horizontal equity : The case for random taxation," Journal of Public Economics, Elsevier, vol. 18(1), pages 1-33, June.
    3. Arnott, Richard J & Hosios, Arthur J & Stiglitz, Joseph E, 1988. "Implicit Contracts, Labor Mobility, and Unemployment," American Economic Review, American Economic Association, vol. 78(5), pages 1046-1066, December.
    4. Spence, Michael & Zeckhauser, Richard, 1971. "Insurance, Information, and Individual Action," American Economic Review, American Economic Association, vol. 61(2), pages 380-387, May.
    5. anonymous, 1982. "Economic policy measures," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 45, july.
    6. Weiss, Laurence, 1976. "The Desirability of Cheating Incentives and Randomness in the Optimal Income Tax," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1343-1352, December.
    7. Dionne, G., 1980. "Moral Hazard and State-Dependent Utility Function," Cahiers de recherche 8053, Universite de Montreal, Departement de sciences economiques.
    8. anonymous, 1982. "International economic situation and outlook," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 45, january/f.
    9. anonymous, 1982. "International economic situation and developments," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 45, august.
    10. Helpman, Elhanan & Laffont, Jean-Jacques, 1975. "On moral hazard in general equilibrium theory," Journal of Economic Theory, Elsevier, vol. 10(1), pages 8-23, February.
    11. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
    12. Braverman, Avishay & Stiglitz, Joseph E, 1982. "Sharecropping and the Interlinking of Agrarian Markets," American Economic Review, American Economic Association, vol. 72(4), pages 695-715, September.
    13. Mitra, Pradeep K., 1983. "A theory of interlinked rural transactions," Journal of Public Economics, Elsevier, vol. 20(2), pages 167-191, March.
    14. anonymous, 1982. "New Zealand economic chronology 1981," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 45, january/f.
    15. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 629-649.
    16. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    17. Diamond, P. A. & Mirrlees, J. A., 1978. "A model of social insurance with variable retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 295-336, December.
    18. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    19. anonymous, 1982. "Time and economics," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 4-5.
    20. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    21. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production II: Tax Rules," American Economic Review, American Economic Association, vol. 61(3), pages 261-278, June.
    22. Spence, Michael, 1978. "Product differentiation and performance in insurance markets," Journal of Public Economics, Elsevier, vol. 10(3), pages 427-447, December.
    23. Unknown, 1982. "The Biologic and Economic Assessment of DBCP," Technical Bulletins 157639, United States Department of Agriculture, Economic Research Service.
    24. Unknown, 1982. "The Biologic and Economic Assessment of 2, 4, 5-T," Technical Bulletins 157646, United States Department of Agriculture, Economic Research Service.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Iossa, Elisabetta & Martimort, David, 2015. "Pessimistic information gathering," Games and Economic Behavior, Elsevier, vol. 91(C), pages 75-96.
    2. van de Klundert, T.C.M.J. & Peters, P., 1986. "Price inertia in a macroeconomic model of monopolistic competition," Research Memorandum FEW 221, Tilburg University, School of Economics and Management.
    3. Kamel Malik BENSAFTA & Gervasio SEMEDO, 2013. "Transmission de la volatilité et central banking : quelles réactions durant la crise des subprimes ?," LEO Working Papers / DR LEO 1694, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    4. Kamel Malik Bensafta & Gervasio Semedo, 2014. "Transmission de la volatilité et Central-Banking," Working Papers halshs-01012058, HAL.
    5. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    6. van de Klundert, T.C.M.J., 1987. "Coordination failure in an industrial society," Other publications TiSEM 95c6a69d-820e-49db-8b11-1, Tilburg University, School of Economics and Management.
    7. Eleni A. Kaditi & Elisavet I. Nitsi, 2013. "Recent Evidence on the Taxpayers’ Reporting Decision in Greece: A Quantile Regression Approach," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 3-24.
    8. Henri Loubergé, 1998. "Risk and Insurance Economics 25 Years After," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 23(4), pages 540-567, October.
    9. Hisahiro Naito, 2003. "Atkinson and Stiglitz Theorem with Endogenous Human Capital Accumulation," ISER Discussion Paper 0596, Institute of Social and Economic Research, Osaka University.
    10. Lee, David & Saez, Emmanuel, 2012. "Optimal minimum wage policy in competitive labor markets," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 739-749.
    11. Morten Nyborg Støstad & Frank Cowell, 2021. "Inequality as an Externality: Consequences for Tax Design," PSE Working Papers halshs-03495989, HAL.
    12. Hänsel, Martin C. & Franks, Max & Kalkuhl, Matthias & Edenhofer, Ottmar, 2022. "Optimal carbon taxation and horizontal equity: A welfare-theoretic approach with application to German household data," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).
    13. Justina Klimaviciute & Pierre Pestieau, 2018. "Long-term care social insurance: How to avoid big losses?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(1), pages 99-139, February.
    14. Jacobs, Bas & van der Ploeg, Frederick, 2019. "Redistribution and pollution taxes with non-linear Engel curves," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 198-226.
    15. Boadway,Robin & Cuff,Katherine, 2022. "Tax Policy," Cambridge Books, Cambridge University Press, number 9781108949453.
    16. Helmuth Cremer, 2017. "Book review of Optimal Redistributive Taxation," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 15(3), pages 295-299, September.
    17. Naito, Hisahiro, 2004. "Endogenous human capital accumulation, comparative advantage and direct vs. indirect redistribution," Journal of Public Economics, Elsevier, vol. 88(12), pages 2685-2710, December.
    18. Bastani, Spencer & Blumkin, Tomer & Micheletto, Luca, 2015. "Optimal wage redistribution in the presence of adverse selection in the labor market," Journal of Public Economics, Elsevier, vol. 131(C), pages 41-57.
    19. Charles Blackorby & Craig Brett, 2004. "Production Efficiency and the Direct‐Indirect Tax Mix," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(1), pages 165-180, February.
    20. Stiglitz, Joseph E., 1982. "Utilitarianism and horizontal equity : The case for random taxation," Journal of Public Economics, Elsevier, vol. 18(1), pages 1-33, June.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:qed:wpaper:500. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark Babcock (email available below). General contact details of provider: https://edirc.repec.org/data/qedquca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.