The concept of negative externality is central to the teaching of environmental economics, but corrective taxes are almost always regressive. How exactly might governments return externality-correcting tax revenue to overcome regressivity and not alter marginal incentives? In addition, there is a desire to achieve a double dividend in the use of…

The author makes a pedagogical contribution to optimal income taxation. Using a very simple model adapted from George A. Akerlof (1978), he demonstrates a key result in the approach to public economics and welfare economics pioneered by Nobel laureate James Mirrlees. He shows how incomplete information, in addition to the need to preserve…

In each period of a dynamic tax-rebate program, a (fixed) quantity tax is imposed on each unit of a given good, and the tax revenue is rebated back to the consumer in the next period. The program lasts for infinite number of periods. The author considers a representative consumer's dynamic consumption behavior, the long-run steady-state…

The author combines the supply and demand model of taxes with a Cournot model of bribe takers to develop a simple and useful framework for understanding the effect of corruption on economic activity. There are many examples of corruption in both developed and developing countries. Because corruption decreases the level of economic activity and…

The excess burden of taxation typically has two graphical representations in undergraduate microeconomics and public finance textbooks: the IC/BC (indifference curve/budget constraint) representation and the demand/supply representation. The IC/BC representation has the advantage of showing the behavioral response to a distortionary tax and how a…

This classroom exercise illustrates the Tiebout (1956) hypothesis that residential sorting across multiple jurisdictions leads to a more efficient allocation of local public goods. The exercise places students with heterogeneous preferences over a public good into a single classroom community. A simple voting mechanism determines the level of…

Criticizes the standard presentation, in introductory economics, of the burden of a tax as an application of elasticity. Argues that using the slopes of a supply and demand curve is the simplest and easiest way to clarify tax incidence. Includes three graphs illustrating this approach. (MJP)