Political economy of intermediate goods taxation

Daron Acemoglu, Mikhail Golosove, Aleh Tsyvinski

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


We generalize the Diamond-Mirrlees production efficiency theorem, that there should be no taxes on sectors producing pure intermediate goods, to an environment with political economy constraints. In our economy, allocations and taxation are decided by self-interested politicians without the power to commit to future policies. The Diamond-Mirrlees production efficiency result holds even when political economy constraints introduce distortions on labor supply and capital accumulation.

Original languageEnglish (US)
Pages (from-to)353-366
Number of pages14
JournalJournal of the European Economic Association
Issue number2-3
StatePublished - Apr 2008

All Science Journal Classification (ASJC) codes

  • General Economics, Econometrics and Finance


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