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Title:Optimal democratic mechanisms for taxation and public good provision PDF Logo
Authors:Bierbrauer, Felix
Sahm, Marco
Issue Date:2008
Series/Report no.:Preprints of the Max Planck Institute for Research on Collective Goods 2008,9
Abstract:We study the interdependence of optimal tax and expenditure policies. An optimal policy requires that information on preferences is made available. We first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on public good provision face an own incentive scheme that differs from the tax system. We then study democratic mechanisms with the property that tax payers vote over public goods. Under such a mechanism, efficiency cannot be reached and welfare from public good provision declines as the inequality between rich and poor individuals increases.
Subjects:Public goods
optimal taxation
two-dimensional heterogeneity
asymmetric information
JEL:H41
D71
D72
D82
Document Type:Working Paper
Appears in Collections:Preprints of the Max Planck Institute for Research on Collective Goods

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