Articles

Moral Hazard and Optimal Commodity Taxation

Stiglitz, Joseph E.; Arnott, Richard J.

This paper demonstrates that in an economy with moral hazard and more than one commodity, competitive equilibrium is not constrained-efficient. To correct the market failure, differential commodity taxation is necessary. A general optimal tax formula is derived, and special cases are discussed.

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Also Published In

Title
Journal of Public Economics
DOI
https://doi.org/10.1016/0047-2727(86)90023-X

More About This Work

Academic Units
Economics
Published Here
April 29, 2013