Are User Fees Really Regressive?

30 Pages Posted: 12 Jul 2012

See all articles by George Economides

George Economides

Athens University of Economics and Business - Department of International and European Economic Studies

Apostolis Philippopoulos

Athens University of Economics and Business - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); University of Essex

Date Written: July 12, 2012

Abstract

This paper studies the aggregate and distributional implications of introducing user fees for publicly provided excludable public goods into a model with consumption and income taxes. The setup is a neoclassical growth model where agents differ in earnings and second-best policy is chosen by a Ramsey government. Our main result is that the adoption of user fees by the Ramsey government not only increases aggregate efficiency, but it also decreases inequality. This result is in contrast to common view and policy practice.

Keywords: user fees, Ramsey taxation, efficiency, inequality

JEL Classification: H400, H200, D600

Suggested Citation

Economides, George and Philippopoulos, Apostolis, Are User Fees Really Regressive? (July 12, 2012). CESifo Working Paper Series No. 3875, Available at SSRN: https://ssrn.com/abstract=2104060 or http://dx.doi.org/10.2139/ssrn.2104060

George Economides (Contact Author)

Athens University of Economics and Business - Department of International and European Economic Studies ( email )

GR-10434 Athens
Greece
+30-210-8214122 (Phone)
+30-210-8203729 (Fax)

Apostolis Philippopoulos

Athens University of Economics and Business - Department of Economics ( email )

76 Patission Street
GR-10434 Athens
Greece
+301 322 3187 (Phone)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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