Indirect taxes on transportation activities that pollute can correct externalities and close the gaps between private and social costs. However, policy makers often find such Pigou taxes difficult to implement because of political resistance due to possibly adverse affects on equity. For this reason it is important to assess the distributional aspects of environmental levies. This article estimates properties of the demand for transportation in parametric and non-parametric analyses of Consumer Expenditure Surveys for the United States, 2000, and finds patterns in the resulting set of Engel curves. Private transportation using air flights and new automobiles have Engel elasticities above unity while public transportation via mass transit has Engel elasticity below unity. The findings can be interpreted in an important way since they show that a differentiated scheme of environmental taxes on transportation may function progressively. A Pigou scheme with larger taxes on modes of transportation that pollute more appears to coincide with larger levies on luxury modes preferred by richer households.

A system of consumer expenditure functions is estimated from Norwegian household budget data. Specific features o f our approach are: (i) Panel data on individual households are used, which offer far richer o p p o r t u n i t i e s f o r i d e n t i f i c a t i o n , e s t i m a t i o n a n d t e s t i n g t h a n u s u a l c r o s s s e c t i o n data. (ii) Measurement errors are carefully modelled. Total consumption expenditure is modelled as a latent variable, purchase expenditures on different goods and two income measures are used as indicators of this basic latent variable. (iii) The distribution of latent total expenditure across households, and its evolution over time, is estimated and important properties tested. (iv) Individual differences in preferences, represented by individual, time invariant latent variables, are modelled, identified, estimated, and tested. (v) We test the hypothesis that preferences are uncorrelated with total consumption expenditure, which is basic to all cross section estimation of consumer demand functions. (vi) The model can be formalized as a special case of the LISREL model, and the maximum likelihood algorithm of the computer program LISREL VI is applied. 1 Paper presented at the Econometric Society European Meeting, Bologna, August 29-September 2, 1988. This research has been financed in part by NORAS (project no. 214 1 802). Liv Daasvatn has given valuable programming assistance in the preparation of the data.

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The welfare effects of introducing taxes on emissions of carbon dioxide is analysed within an empirical general equilibrium model of the Norwegian economy. A CO 2 tax regime where we aim at stabilising the CO, emissions at the 1990 emission level in 2020 is compared to a reference scenario without such taxes. In the simulations introduction of CO 2 taxes reduces gross domestic product, but increases net national real disposable income, private consumption and money metric utility. This difference in sign is due to a positive terms of trade effect, some of the CO2 taxes will be paid by foreigners through exports. The welfare effects differ from household to household depending on the composition of their total consumption. Poor households are less favourably affected than rich households, due to smaller budget shares for the rich households on consumer goods which imply relatively much CO 2 emissions.

This article discusses revenue estimating procedures for changes to the personal income tax. Using partial equilibrium revenue estimates of the personal income tax cuts introduced in Norway in 2006 as an example, we fi nd wide variation in the estimates of the revenue costs of cuts depending on various factors, even in the short term. Our revenue estimates take into account labor supply responses and changes in revenues from payroll taxes and indirect taxes, and we compare our results to those obtained using current static revenue estimating procedures. In general, we fi nd that more than 60 percent of the static revenue cost of personal income tax cuts is offset with higher tax revenues from other tax bases and higher personal income taxes due to increases in labor supply.

A complete system of consumer expenditure functions with 28 commodities is modeled and estimated by means of two-wave household panel data. The total consumption expenditure is treated as latent, with two income measures as observed indicators. The distribution of latent individual differences, interpreted as preference variation, is structured by a factor-analytic approach. Absence of measurement error in total expenditure is clearly rejected, as is also the standard assumption of uncorrelated measurement errors. The 2015 first-and second-order moments of the observed variables are modeled by means of 213 parameters in a reference model. Their maximum likelihood estimates have, with only a few exceptions, the expected sign and a reasonable magnitude. A notable finding is positive correlation between measurement errors of commodities belonging to major groups, e.g. foods, which may be explained by rational shopping behavior. The magnitude and ranking of the Engel elasticity estimates are not sensitive to whether the Engel functions are linear or quadratic.

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Abstract:The partial revenue from each indirect tax and the total revenue from all indirect taxes on consumer goods are derived as functions of all commodity prices, the tax rates of each commodity, total expenditure and demographic variables using a complete demand system. Within this framework we define Dupuit curves, or Laffer curves, and analyze their existence and maximum points theoretically and empirically. The macro demand system is based on exact aggregation across all households in the economy, and on exact aggregation across commodities within a detailed non-homogeneous utility tree. An empirical application for Norway with 55 commodity groups is presented. For beer, wine, spirits and tobacco, consumers can choose among buying at home, cross-border shopping/ tax-free shopping and smuggling. These substitution possibilities increase substantially the price elasticities for these goods. The partial revenue from wine as function of the tax share on wine has a single maximum value close to the actual tax rate in Norway in 1999, conditioned on all the other exogenous variables. The total revenue as a function of the tax share on wine also has a single maximum value, larger than that for the partial revenue. The same results are valid for spirits. For beer and tobacco there is no revenue maximizing tax share.