@article{05bd7d94de22413dbceeb1793b5e646a,
title = "When redistribution makes personalized pricing of externalities useless",
abstract = "We consider a standard optimal taxation framework in which consumers' preferences are separable in consumption and labor and identical over consumption, but are affected by consumption externalities. For every nonlinear, income-dependent pricing of goods there is a linear pricing scheme, combined with an adjusted income tax schedule, that leaves all consumers equally well-off and weakly increases the government's budget. The result depends on whether a linear pricing scheme exists that keeps the aggregate amount of consumption at its initial level observed under nonlinear pricing. We provide sufficient conditions for the assumption to hold. If adjusting the income tax rate is not available, personalized prices for an externality can enhance social welfare if they are redistributive, that is, favor consumers with a larger marginal social value of income.",
author = "Marc Fleurbaey and Ulrike Kornek",
note = "Funding Information: Marc Fleurbaey worked on this manuscript while at the Woodrow Wilson School of Public and International Affairs‐University Center for Human Values, Princeton University, Princeton, NJ and received funding from Ciara Burnham. This manuscript was prepared within the CHIPS project. CHIPS is part of AXIS, an ERA‐NET initiated by JPI Climate, and funded by FORMAS (SE), DLR/BMBF (DE, Grant No. 01LS1904A‐B), AEI (ES) and ANR (FR) with cofunding by the European Union (Grant No. 776608). The authors carry the responsibility for the content of this study. Open Access funding enabled and organized by ProjektDEAL. Funding Information: Marc Fleurbaey worked on this manuscript while at the Woodrow Wilson School of Public and International Affairs-University Center for Human Values, Princeton University, Princeton, NJ?and received funding from Ciara Burnham. This manuscript was prepared within the CHIPS project. CHIPS is part of AXIS, an ERA-NET initiated by JPI Climate, and funded by FORMAS (SE), DLR/BMBF (DE, Grant No. 01LS1904A-B), AEI (ES) and ANR (FR) with cofunding by the European Union (Grant No. 776608). The authors carry the responsibility for the content of this study. Open Access funding enabled and organized by ProjektDEAL. Publisher Copyright: {\textcopyright} 2021 The Authors. Journal of Public Economic Theory Published by Wiley Periodicals LLC",
year = "2021",
month = apr,
doi = "10.1111/jpet.12505",
language = "English (US)",
volume = "23",
pages = "363--375",
journal = "Journal of Public Economic Theory",
issn = "1467-9779",
publisher = "Wiley-Blackwell",
number = "2",
}