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The Disappointing Welfare Impact of Indirect Pigouvian Taxation Evidence from Transportation Christopher R. Knittel and Ryan Sandler September 24 2012 Abstract A basic tenet of economics is that when consumers or rms don t face the true social cost of their actions market outcomes are ine cient.

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Economists favor Pigouvian taxes because they tend to correct for negative externalities, which are generally a burden on the public. For example, air pollution from a factory is borne out in health issues like lung cancer among the population.

These include environmental pollution, strains on public healthcare from the sale of tobacco products, and any other side effects that have an external, negative impact.

What is the primary disadvantage of a Pigovian tax? It reduces the quantity produced of the agricultural good. What kind of tax is implemented to achieve specific environmental, social, or economic goals that are hampered by externalities?

Ideally, Pigouvian taxes equal the costs generated by the negative externality. These costs can be difficult to measure in the real world. Pigouvian taxes are regressive when they impose a harsher burden on the populations with lower incomes compared to those with higher incomes.

When Pigouvian taxes are imposed, the supply of the economic activity producing the negative externality will decrease. Therefore, the quantity demanded will decrease, while the price will increase.

What Is a Pigouvian Tax? A Pigouvian tax, named after 1920 British economist Arthur C. Pigou, is a tax on a market transaction that creates a negative externality, or an additional cost, borne by individuals not directly involved in the transaction. Examples include tobacco taxes, sugar taxes, and carbon taxes.

Pigouvian Tax Advantages A Pigouvian Tax is a corrective tax that is levied (usually on the business but sometimes on the consumer) in order to reduce or eliminate an external cost that is borne by third parties.

While a Pigouvian tax solves the problem of negative externalities, Pigouvian subsidies solve the problem of positive externalities. Pigouvian subsidies are subsidies that are designed to correct positive externalities. The existence of a positive externality leads to the under-consumption of a good or service.

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Form Packages
Adoption
Bankruptcy
Contractors
Divorce
Home Sales
Employment
Identity Theft
Incorporation
Landlord Tenant
Living Trust
Name Change
Personal Planning
Small Business
Wills & Estates
Packages A-Z
Form Categories
Affidavits
Bankruptcy
Bill of Sale
Corporate - LLC
Divorce
Employment
Identity Theft
Internet Technology
Landlord Tenant
Living Wills
Name Change
Power of Attorney
Real Estate
Small Estates
Wills
All Forms
Forms A-Z
Form Library
Customer Service
Terms of Service
DMCA Policy
About Us
Blog
Affiliates
Contact Us
Privacy Notice
Delete My Account
Site Map
All Forms
Search all Forms
Industries
Forms in Spanish
Localized Forms
Legal Guides
Real Estate Handbook
All Guides
Prepared for You
Notarize
Incorporation services
Our Customers
For Consumers
For Small Business
For Attorneys
Our Sites
US Legal Forms
USLegal
FormsPass
pdfFiller
signNow
airSlate workflows
DocHub
Instapage
Social Media
Call us now toll free:
1-877-389-0141
As seen in:
  • USA Today logo picture
  • CBC News logo picture
  • LA Times logo picture
  • The Washington Post logo picture
  • AP logo picture
  • Forbes logo picture
© Copyright 1997-2025
airSlate Legal Forms, Inc.
3720 Flowood Dr, Flowood, Mississippi 39232