Optimal Taxation in a Rent-Seeking Environment

  • Dwight R. Lee
  • Robert D. Tollison
Part of the Topics in Regulatory Economics and Policy book series (TREP, volume 1)


A basic proposition in public finance is that, other things being equal, the less the price elasticity of demand for a good or service the smaller the welfare loss from imposing an excise tax on it. More generally, when considering the optimal pattern of excise taxes on a number of commodities, an inverse relation exists between the tax and the price elasticity of demand. This inverse relation holds in both partial equilibrium models (Hicks, 1947) and general equilibrium models (Baumol and Bradford, 1970; Sandmo, 1976).


Demand Curve Optimal Taxation Rent Seek Excess Burden Commodity Taxation 
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Copyright information

© Springer Science+Business Media New York 1988

Authors and Affiliations

  • Dwight R. Lee
  • Robert D. Tollison

There are no affiliations available

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