INDEX
Ability-to-pay principle
basic considerations, 335±337
deWnition, 180, 333±334
overview, 334±335
Accretion standard, see also Haig±Simons
income
Ad valorem tax, 541±543
Adverse selection, private information, 18
Aggregate present value calculations, 806±808
Aggregate production externalities
bargaining costs versus property rights,
228±229
bargaining with entry and exit, 225±228
entry, exit, and optimality, 224±4225
example, 193
internalization, 217±219
overview, 208±210
pareto±optimal conditions, 210±212
optimal pollution reduction component,
216±217
partial taxes and subsidies, 223
Pigovian tax, 212±213
basic caveats, 200±202
interpersonal equity conditions, 195
overview, 194±195
pareto±optimal conditions, 195±198
trial and error solution, 198±200
policy considerations, 219±221
subsidizing or compensating victims,
222±223
taxing, 221
taxing and subsidizing, 221±222
Aggregate sacriWce, vertical equity, 354±355
Air pollution, U.S. policy, 269
Allocational policy, Wrst-best analysis, 69±70
Altruism, 322±326; see also Pareto-optimal
redistributions
Annual tax incidence, 593±595
Arrow±Lind theorem
actual Wscal systems
Foldes±Rees analysis, 766±768
overview, 765±766
externalities, 764±765
government project expected value, 768±769
931
Arrow±Lind theorem (continued)
net beneWts, 769±770
overview, 760±761
policy implications, 763
proof, 761±763
risk-spreading eVect, 770±771
single versus multiple projects, 763±764
Arrow's impossibility theorem
axioms, 87±91
cycling preferences, 91±92
deWnition, 44
overview, 86±87
reactions, 95±96
As-if maximization, median voter model,
908±909
Asset revaluations, dynamic incidence
analysis, 606
Asymmetric information, see also Private
information
basic problem, 485±486
public sector economics, 17±20
second-best analysis, 76
Atkinson social welfare analysis
Atkinson's assumptions, 104±106
aversion to inequality, 110
bias toward equality, 106±108
index of inequality, 116±117
inequality in U.S., 118
Okun's leaky bucket, 110±112
overview, 104±105
social welfare function, 109
Atkinson's index of inequality, 116±117
Auerbach, Alan
retrospective taxation proposal, 373±378
Auerbach±KotlikoV OLG model, see also
Dynamic tax incidnce
Automobile emissions
control equipment, CAC policy, 247±248
U.S. antipollution legislation, 263
Avoidable loss, tax distortion loss, 407
BACT, see also Best available control
technology
Bargaining
aggregate production externalities
costs versus property rights, 228±229
with entry and exit, 225±228
Coase theorem, 166±167
bargaining set stability, 669±671
overview, 668±669
Baumol±Oates externality model, 225
BeneWt measures, cost±beneWt analysis
Wrst-best
general technology, 785
multiple price change, 784
Wrst-best, single price change
HEV preference, 783±784
overview, 779±782
public sector bias, 782±783
second-best, 785±788
BeneWts-received principle
decreasing cost services, 300±302
taxation, 179±184
Bergson±Samuelson social welfare function
convenience, 42±43
Wrst description, 40±41
marginal social welfare weight, 41
social welfare indiVerence curves, 41±42
Besley±Coate model, welfare stigma, 651±656
Besley±Coate model, workfare, 646±651
Best available control technology
industrial air pollution, 264±265
industrial water pollution, 266
Bias
inXationary, see also InXationary bias
public sector
cost±beneWt analysis, 729, 825±827
single price change, 782±783
Tiebout
median voter model, 913±916
state and local public service surveys,
919±920
Black,
Duncan, Arrow's impossibility
theorem, 92
Blackorby±Donaldson model, in-kind
transfers, 641±646
Boadway, Robin
distributional framework, cost±beneWt
analysis, 811±812
second-best production rules, equity,
709±715
Boiteux problem
analytics, 681±687
constrained government agencies, 690±691
overview, 680±681
public agencies and private markets,
687±689
U.S. Postal Service, 689±690
Bradford model, public sector discount rate,
743±748
Broad-based tax
design
ability-to-pay principle, 333±337
ease of administration, 332
eYciency, 332
932 INDEX
equity, 333
Xexibility, 332±333
optimal commodity tax problem
necessary and suYcient conditions,
433±434
Brown±Oates redistribution model,
federalism, 881±883
Bureaucrats, grants-in-aid, 925±928
CAC policy
automobile emissions control equipment,
247±248
imperfect taxes comparison, 252±253
industrial air pollution, 245±246, 264±265
industrial water pollution, 245±246, 266
taxes and uncertainty, 246±247
Canadian tax system, pure lifetime tax
incidence, 596±597
Capital gains
Auerbach±KotlikoV OLG model, 615
Auerbach tax proposal, 376±378
Haig±Simons criterion, 363±364
human capital taxation, 378±382
inXationary bias, 370±373
taxation, 370
Vickrey tax proposal, 375±376
Carbon dioxide, U.S. antipollution legislation,
268
Cash transfers
acceptable public assistance program,
636±638
broad-based approach, 634±635
charity
cash-equivalent in-kind transfers,
318±319
in-kind comparison, 315±316
recipient cash preference, 316±318
earned income tax credit, 638±639
in-kind transfers, 639±641
special needs, 639±641
targeted approach, 635±636
universality, 639±641
CGE, see also Computable general
equilibrium
Chain reaction game, cost±beneWt analysis,
728, 820±822
Charity
cash-equivalent in-kind transfers, 318±319
in-kind versus cash, 315±316
recipient cash preference, 316±318
Circulation mobility
social welfare, 137±139
utilitarian social welfare, 139
weighted social welfare, 139±142
Clarke taxes, preference revelation, 184±187
Coalition stability, bargaining set stability, 669
Coase theorem
bargaining, 166±167, 217±219, 668±678
overview, 668±669
with free entry, 225±229
Collective political decision, normative public
sector economics, 16±17
Commercial property taxes, median voter
model, 912
Commodity tax
optimal, see also Optimal commodity tax
redistribution limits, Sah, 490±493
Compensating surplus, single price change,
781
Competition
destructive, federalism, 832±833
perfect, social welfare maximization, 55±56
Complete property right, aggregate
production externalities, 226
Composition principle, Young's taxation
principles, 357
Comprehensive tax base, see also
Haig±Simons income
Computable general equilibrium models
tax incidence, 529, 603±606
lifetime, Fullerton±Rogers model,
619±621
Congestion, median voter model, 909
Consistency principle, Young's taxation
principles, 357
Constant returns to scale
Harberger analysis, 549±550
optimal commodity taxation, 458±461
Consumer sovereignty, 7±8
Consumption externalities
aggregate externality, 193±202
deWnition, 147
individualize externality, 159±170
opportunity
cost of public funds, 740
Samuelsonian nonexclusive good,
171±193
worst case, 154±159
Consumption±production externalities
deWnition, 148
pollution analysis
interpersonal equity conditions, 237
overview, 235±237
pareto±optimal conditions, 237±239
standards legislation, 241
U.S. policies, 245±261
INDEX 933
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