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Optimal Redistributive Taxation when Government’s and Agents’ Preferences Differ

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  • Blomquist, Sören

    ()
    (Department of Economics)

  • Micheletto, Luca

    ()
    (Department of Economics)

Abstract

Paternalism, merit goods and specific egalitarianism are concepts we sometimes meet in the literature. The thing in common is that the policy maker does not fully respect the consumer sovereignty principle and design policies according to some other criterion than individuals’ preferences. Using the self-selection approach to tax problems developed by Stiglitz (1982) and Stern (1982), the paper provides a characterization of the properties of an optimal redistributive mixed tax scheme in the general case when the government evaluates individuals’ well-being using a different utility function than the one maximized by private agents.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2005:7.

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Length: 22 pages
Date of creation: 21 Feb 2005
Date of revision:
Handle: RePEc:hhs:uunewp:2005_007

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Keywords: optimal taxation; behavioral economics; paternalism; merit goods; non-welfarism;

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References

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  1. Besley, Timothy, 1988. "A simple model for merit good arguments," Journal of Public Economics, Elsevier, vol. 35(3), pages 371-383, April.
  2. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, vol. 6(4), pages 327-358, November.
  3. Kanbur, Ravi & Keen, Michael & Tuomala, Matti, 1994. "Optimal non-linear income taxation for the alleviation of income-poverty," European Economic Review, Elsevier, vol. 38(8), pages 1613-1632, October.
  4. RACIONERO, Maria del Mar, 1998. "Optimal tax mix with merit goods," CORE Discussion Papers 1998004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Pollak, Robert A, 1969. "Conditional Demand Functions and Consumption Theory," The Quarterly Journal of Economics, MIT Press, vol. 83(1), pages 60-78, February.
  6. Sandmo, Agnar, 1983. "Ex Post Welfare Economics and the Theory of Merit Goods," Economica, London School of Economics and Political Science, vol. 50(197), pages 19-33, February.
  7. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
  8. Tobin, James, 1970. "On Limiting the Domain of Inequality," Journal of Law and Economics, University of Chicago Press, vol. 13(2), pages 263-77, October.
  9. Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
  10. 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.
  11. Schroyen, Fred, 2005. "An alternative way to model merit good arguments," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 957-966, June.
  12. Blomquist, Sören & Micheletto, Luca, 2003. "Age Related Optimal Income Taxation," Working Paper Series 2003:7, Uppsala University, Department of Economics.
  13. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  14. 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.
  15. Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May.
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