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A note on optimal income taxation, public goods provision and robust mechanism design

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  • Bierbrauer, Felix
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    Abstract

    This paper extends the model of optimal income taxation due to Mirrlees (Mirrlees, J., 1971. An exploration in the theory of optimum income taxation. Review of Economic Studies 38, 175-208) and includes private information on public goods preferences. A mechanism design approach is used to establish the following result: If policies are required to be robustly implementable in the sense of Bergemann and Morris (Bergemann, D., Morris, S., 2005. Robust mechanism design. Econometrica 73, 1771-1813), then the optimality conditions in the extended model with uncertainty about tax and expenditure policies are the same as in the standard model of optimal income taxation. The paper provides a foundation for a widely-used assumption in public finance, namely that individuals optimize their behavior subject to a predetermined and commonly known tax system.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 93 (2009)
    Issue (Month): 5-6 (June)
    Pages: 667-670

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    Handle: RePEc:eee:pubeco:v:93:y:2009:i:5-6:p:667-670

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    Web page: http://www.elsevier.com/locate/inca/505578

    Related research

    Keywords: Optimal taxation Public goods provision Revelation of preferences Mechanism design;

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    Cited by:
    1. Thomas Giebe & Paul Schweinzer, 2013. "Consuming your Way to Efficiency: Public Goods Provision through Non-Distortionary Tax Lotteries," CESifo Working Paper Series 4228, CESifo Group Munich.
    2. Felix J. Bierbrauer, 2014. "Optimal Tax and Expenditure Policy with Aggregate Uncertainty," American Economic Journal: Microeconomics, American Economic Association, vol. 6(1), pages 205-57, February.
    3. Felix Bierbrauer, 2009. "Optimal Income Taxation and Public Goods Provision in a Large Economy with Aggregate Uncertainty," CESifo Working Paper Series 2701, CESifo Group Munich.

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