word
Pigouvian tax
pih-GOO-vee-un TAKS
pɪˈɡuːviən tæksListen
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Syllable breakdown
Pigouviantax
Dictionary meaning
a tax levied on economic activities that generate negative externalities, designed to align private costs with social costs and thereby correct market failure; named after British economist Arthur Pigou who formalized the concept in 1920; the ideal Pigouvian tax equals the marginal external cost imposed on society; carbon taxes applied to fossil fuel emissions are the most prominent contemporary example
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