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Title:Optimal income taxation and public good provision in a two-class economy PDF Logo
Authors:Bierbrauer, Felix
Issue Date:2005
Series/Report no.:Preprints of the Max Planck Institute for Research on Collective Goods 2005,25
Abstract:This paper combines the problem of optimal income taxation with the free-rider problem in public good provision. There are two groups of individuals with private information on their earning ability and their valuation of a public good. Adjustments of the transfer system are needed to discourage the more productive from exaggerating the desirability of public good provision. Similarly, the less productive need to be prevented from understating their valuation. Relative to an optimal income tax, which focuses solely on earning ability, income transfers are increased whenever a public good is installed and are decreased otherwise.
Subjects:Income Taxation
Public Good Provision
Revelation of Preferences
Two-dimensional Heterogeneity
JEL:D71
D82
H21
H41
Document Type:Working Paper
Appears in Collections:Preprints of the Max Planck Institute for Research on Collective Goods

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