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The Mirrlees Review recommends that commodity taxation should in general be uniform, but with some goods consumed in conjunction with labour supply (such as child care) left untaxed. This paper examines the validity of this claim in an optimal income tax framework. Contrary to the recommendation of the Review, our theoretical results imply that even if all goods other than the good needed for working are separable from leisure, the optimal tax on these goods should not be uniform. Instead, goods with larger expenditure elasticities should be discouraged relatively more by the tax system. If the government fully subsidises the cost of the good needed for working, then commodity taxation is uniform under the standard separability assumption. Our results imply that the optimal commodity tax system is dependent on the expenditure side of the government. A calibration exercise presented in the paper suggests that these results can be quantitatively important.

<p>This thesis consists of a summary and four papers. The first two papers address political economy and indus-trial organization aspects of agricultural policy, and the last two international aspects of environmental policy.</p><p>Paper [I] explains Common Agricultural Policy (CAP) subsidies to farmers by the influence of farmer interest-groups with an EU-wide membership. The analysis is based on panel-data for fifteen commodities over the period 1986-2003. Because the CAP is set as an overall EU policy, effective lobbying presents a collective ac-tion problem to the farmers in the EU as a whole. Indicators of lobbying, which are based on this perception, are found to explain part of the variation in agricultural support.</p><p>In Paper [II], the Bresnahan-Lau framework is used to analyze whether policy reforms, i.e. the two-price sys-tem (an input quota, 1986-1991) and a general deregulation of dairy policy (1991-1994) had any market power effects on the Swedish butter market. The results show that the null hypothesis of no market power cannot be rejected, for any of the specific policy reforms, at any reasonable significance level.</p><p>Paper [III] concerns the welfare consequences of environmental policy cooperation. It is assumed that coun-tries finance their public expenditures by using distortionary taxes, and that they differ with respect to compe-tition in the labor market. It is shown how the welfare effect of an increase in the expenditures on abatement depends on changes in the environmental damage, employment and work hours. The welfare effect is also related to the strategic interaction among the countries in the prereform equilibrium.</p><p>In Paper [IV] environmental policy in an economic federation, where each national government faces a mixed tax problem, is addressed. It is assumed that the federal government sets emission targets, which are imple-mented at the national level. It is also assumed that the economic federation is decentralized. The results high-light a strategic role of income and commodity taxation, i.e. each country uses its policy instruments, at least in part, to influence the emission target.</p>

This thesis consists of a summary and four papers. The first two papers address political economy and indus-trial organization aspects of agricultural policy, and the last two international aspects of environmental policy. Paper [I] explains Common Agricultural Policy (CAP) subsidies to farmers by the influence of farmer interest-groups with an EU-wide membership. The analysis is based on panel-data for fifteen commodities over the period 1986-2003. Because the CAP is set as an overall EU policy, effective lobbying presents a collective ac-tion problem to the farmers in the EU as a whole. Indicators of lobbying, which are based on this perception, are found to explain part of the variation in agricultural support. In Paper [II], the Bresnahan-Lau framework is used to analyze whether policy reforms, i.e. the two-price sys-tem (an input quota, 1986-1991) and a general deregulation of dairy policy (1991-1994) had any market power effects on the Swedish butter market. The results show that the null hypothesis of no market power cannot be rejected, for any of the specific policy reforms, at any reasonable significance level. Paper [III] concerns the welfare consequences of environmental policy cooperation. It is assumed that coun-tries finance their public expenditures by using distortionary taxes, and that they differ with respect to compe-tition in the labor market. It is shown how the welfare effect of an increase in the expenditures on abatement depends on changes in the environmental damage, employment and work hours. The welfare effect is also related to the strategic interaction among the countries in the prereform equilibrium. In Paper [IV] environmental policy in an economic federation, where each national government faces a mixed tax problem, is addressed. It is assumed that the federal government sets emission targets, which are imple-mented at the national level. It is also assumed that the economic federation is decentralized. The results high-light a strategic role of income and commodity taxation, i.e. each country uses its policy instruments, at least in part, to influence the emission target.