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Title:Optimal income taxation and public-goods provision with preference and productivity shocks PDF Logo
Authors:Bierbrauer, Felix
Issue Date:2010
Series/Report no.:Preprints of the Max Planck Institute for Research on Collective Goods 2010,18
Abstract:We study how an optimal income tax and an optimal public-goods provision rule respond to preference and productivity shocks. A conventional Mirrleesian treatment is shown to provoke manipulations of the policy mechanism by individuals with similar interests. We therefore extend the Mirrleesian model so as to include a requirement of coalition-proofness. The main results are the following: first, the possibility of preference shocks yields a new set of collective incentive constraints. Productivity shocks have no such implication. Second, the optimal policy gives rise to a positive correlation between the public-goods provision level, the extent of redistribution and marginal tax rates.
Subjects:Public Goods
Optimal Taxation
Mechanism Design
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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