Reference

Helmuth Cremer, and Firouz Gahvari, Atkinson and Stiglitz theorem in the presence of a household production sector, IDEI Working Paper, n. 831, July 2014.

Abstract

We show that the celebrated Atkinson and Stiglitz (1976) result on the uniformity of the commodity tax rates when preferences are weakly separable between goods and leisure does not hold when (at least) one of the goods is produced within the household. The result is restored if preferences are weakly separable in market goods on the one hand, and leisure and household goods on the other.

Keywords

Atkinson and Stiglitz theorem; household production; weak-separability;

JEL codes

  • H2: Taxation, Subsidies, and Revenue
  • H5: National Government Expenditures and Related Policies