July 8th- Luis Rodrigo ARNABAL ROCCA's PhD Defense

July 08, 2020 Research

Luis Rodrigo ARNABAL ROCCA will defend his thesis on «Essays on Public Economics» on Wednesday 8th July 2020 at 03:30 PM (by ZOOM meeting).

Link: https://us04web.zoom.us/j/79292468281?pwd=bFNOSStzWUhDQTZXTEs4NzRoTVMvdz09

  • ID: 792 9246 8281
  • password: 9YWDu0

Supervisor: Helmuth CREMER

Memberships are:

  • Francesca BARIGOZZI, University of Bologne
  • Professeur Pierre PESTIEAU, University of Catholique de Louvain, Liège
  • Professeur Jean-Marie LOZACHMEUR, UTC - TSE
  • Professeur Helmuth CREMER, UTC - TSE
  • Professeure Catarina GOULẦO, UT1 Capitole
  • Professeure Chiara CANTA, Toulouse Business School


This thesis consists of three essays in public economics. They are concerned on the impact of government intervention in markets characterized by the presence of harmful goods.
The first chapter considers a setting where individuals can consume two types of sin goods differ in their consumption observability (taxability) by the government. As a benchmark, the first-best taxes for the observable and non-observable sin good are derived, considering homogeneous individuals. In the second-best setting, where observability on sin good consumption is limited, the rule for the taxable sin good is shown to depend on the degree of complementarity or substitutability with the unobservable sin good. Finally, redistributional considerations are incorporated by extending the analysis to a setting where individuals differ in their wealth and in their degree of misperception of the health damage caused by sin good consumption. Policy implications are illustrated considering physical inactivity and illicit drugs as non-taxable sin goods, while alcohol, tobacco, fat and sugar account for the taxable sin goods.
The second chapter studies the optimal policies related to the legalization of marijuana, in a setting where consumers differ in their utility from consumption of the psychoactive component of cannabis, THC, and suffer from misperception on the health damage it causes. We analyze this problem through a vertical differentiation model, where a public and a black market firm compete in prices and quality (THC content). A paternalistic government would like to correct for the misperceived health damage caused by marijuana consumption, as well as to reduce the size of the black market. We show that it is the undesirability of black market profits, rather than the health damage misperception, what makes the first-best allocation impossible to decentralize. We find two possible equilibria, in which the public firm serves either the consumers with the highest or the lowest willingness to pay for quality. Allowing the public firm to move first, à la Stackelberg, does not provide it an advantage and social welfare remains second-best.
The third chapter analyses on how the scheme towards harmful drugs adopted by a symmetric neighboring jurisdiction, impacts in the domestic optimal drug policy in a imperfectly competitive market for harmful drugs, characterized by the presence of a black market firm and where consumers may engage in cross-border shopping. In our setting, a drug policy consists in adopting either a scheme of prohibition or one of legalization, and to decide how much to invest in enforcement activities to tackle black market sup- ply. We consider a negative social valuation for consumption of harmful drugs, as well as for the profits generated in the black market. We find that for a low (high) concern for consumption of harmful drugs, both jurisdictions adopt in equilibrium a scheme of legalization (prohibition). More interestingly, for an intermediate social valuation for consumption of harmful drugs, different scenarios may arise, that can for instance ex- plain why two symmetric jurisdictions may end up adopting different schemes towards harmful drugs. Furthermore, under some circumstances governments may face a prisoner’s dilemma, where the resulting equilibrium is one where both jurisdictions legalize the harmful drug, despite that both sticking to a scheme of prohibition would yield a better outcome.