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Optimal democratic mechanisms for taxation and public good provision

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  • Bierbrauer, Felix
  • Sahm, Marco
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    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.

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    Bibliographic Info

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

    Volume (Year): 94 (2010)
    Issue (Month): 7-8 (August)
    Pages: 453-466

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    Handle: RePEc:eee:pubeco:v:94:y:2010:i:7-8:p:453-466

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

    Related research

    Keywords: Public goods Optimal taxation Two-dimensional heterogeneity Asymmetric information;

    References

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    Cited by:
    1. Martin Kolmar & Dana Sisak, 2014. "(In)efficient public-goods provision through contests," Social Choice and Welfare, Springer, vol. 43(1), pages 239-259, June.

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