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1 CREST - Centre de Recherche en Économie et Statistique 2 IFS - Laboratory of the Institute for Fiscal Studies 3 Department of Economics

Abstract : In a second best environment, the optimal policy choice sometimes follows first best rules, as described in a number of scattered works. This paper presents a formal general argument which allows to unify much of the literature. It lays down the information structure and separability assumptions under which the results hold in a variety of setups, with extensions to preference heterogeneity and individual production sets

Keywords : separability second best optimality indirect taxes Samuelson rule Pigovian taxation individual production

Author: Stéphane Gauthier - Guy Laroque -



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