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Mixed Tax Systems and the Public Provision of Private Goods

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  • Alessandro Balestrino

Abstract

In contrast to what used to be conventional wisdom among economists,several recent contributions have shown that in-kind transfersschemes can be welfare-improving in the presence of distortionarytaxes (usually, linear taxes or a general income tax). In thisnote, we extend previous work by considering the most generaltax system compatible with reasonable information constraints,i.e. a mix of linear indirect and non-linear direct taxes. Threemain results are noted. We find that in the presence of a mixedtax system (as opposed to the non-linear income tax alone): i) not only encouraged but also discouraged goods satisfy a conditionfor the desirability of public provision; ii) there is a tendencyfor the optimal level of in-kind transfers to be lower; iii)there is a basic equivalence between uniform and income-contingentin-kind transfers. We also show how previous results can be derivedas special cases of ours and others have to be modified to accountfor the mixed tax system. Copyright Kluwer Academic Publishers 2000

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File URL: http://hdl.handle.net/10.1023/A:1008729304743
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 7 (2000)
Issue (Month): 4 (August)
Pages: 463-478

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Handle: RePEc:kap:itaxpf:v:7:y:2000:i:4:p:463-478

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: public provision of private goods; distortionary taxes; mixed tax systems; in-kind transfers;

References

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  1. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
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  12. Nava, Mario & Schroyen, Fred & Marchand, Maurice, 1996. "Optimal fiscal and public expenditure policy in a two-class economy," Journal of Public Economics, Elsevier, vol. 61(1), pages 119-137, July.
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  16. BOADWAY, Robin & MARCHAND, Maurice & SATO, Motohiro, . "Subsidies versus public provision of private goods as instruments for redistribution," CORE Discussion Papers RP -1355, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Munro, Alistair, 1991. "The optimal public provision of private goods," Journal of Public Economics, Elsevier, vol. 44(2), pages 239-261, March.
  18. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
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  22. Cremer, Helmuth & Gahvari, Firouz, 1997. "In-kind transfers, self-selection and optimal tax policy," European Economic Review, Elsevier, vol. 41(1), pages 97-114, January.
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Citations

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Cited by:
  1. Luciano G. Greco, 2011. "Optimal Redistribution with Productive Social Services," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(1), pages 55-73, 03.
  2. Blomquist, Sören & Christiansen, Vidar, 2007. "Public Provision of Private Goods and Nondistortionary Marginal Tax Rates," Working Paper Series 2007:7, Uppsala University, Department of Economics.
  3. Spencer Bastani & Sören Blomquist & Luca Micheletto, 2010. "Public Provision of Private Goods, Tagging and Optimal Income Taxation withHeterogeneity in Needs," CESifo Working Paper Series 3275, CESifo Group Munich.

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