SFB 303 Discussion Paper No. A - 64

Author: Sandmo, Agnar
Title: A Reinterpretation of Elasticity Formulae in Optimum Tax Theory
Abstract: This paper presents a unified interpretation of three special cases which have been widely discussed in the theory of optimum taxation. These are the Corlett-Hague case and two versions of the inverse elasticity rule, derived on the assumption that either the compensated or the uncompensated cross elasticities of demand are zero. It is demonstrated that all three cases imply that that it is the compensated elasticities which determine efficient tax differentiation, and that complementarity with leisure, emphasized by Corlett and Hague, plays a role in the interpretation of all three cases.
Creation-Date: 1986
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