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Production Efficiency and Profit Taxation

Abstract : Consider a simple general equilibrium economy with one representative consumer, a single competitive firm and the government. Suppose that the government has to finance public expenditures using linear consumption taxes and/or a lump-sum tax on profits redistributed to the consumer. This note shows that, if the tax rate on profits cannot exceed 100 percent, one cannot improve upon the second-best optimum of an economy with constant returns to scale by using a less efficient profit-generating decreasing returns to scale technology.
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https://halshs.archives-ouvertes.fr/halshs-01622337
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Submitted on : Tuesday, October 24, 2017 - 12:39:00 PM
Last modification on : Friday, April 29, 2022 - 10:13:20 AM
Long-term archiving on: : Thursday, January 25, 2018 - 12:34:58 PM

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  • HAL Id : halshs-01622337, version 1

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Stéphane Gauthier, Guy Laroque. Production Efficiency and Profit Taxation. 2017. ⟨halshs-01622337⟩

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