Terms Beginning With 'p'

Pigovian Tax

  • January 18, 2020
  • Team Kalkine

Economist Arthur Pigou had developed the concept of externalities in 1920s, which is essentilly consequence of an industrial or commercial activity which affects other parties. Pigovian tax is a tax levied on goods that generate , during their production, negative externalities such as harmful substances, pollution or congestion. The idea behind such as tax is to make the price of the good equal to the social marginal cost and ensures a more efficient allocation of resources.

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