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Should the Good and the Selfish be Taxed Differently?

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  • LONG, Ngo van
  • STÄHLER, Frank

Abstract

This paper considers an environment where individual actions have externalities, and where there are two types of agents: socially responsible agents (the good) and selfish agents. Selfish agents have payoff functions that do not take into account social welfare. The payoff of a socially responsible agent is a linear combination of (i) social welfare, and (ii) the payoff of a selfish agent. We demonstrate that the corrective tax rates that maximize social welfare do not depend on the degree of social responsibility of socially responsible agents. Hence, the good and the selfish should not be taxed differently.

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Bibliographic Info

Paper provided by Centre interuniversitaire de recherche en économie quantitative, CIREQ in its series Cahiers de recherche with number 07-2010.

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Length: 16 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:mtl:montec:07-2010

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Keywords: Efficiency-inducing taxation; externalities; social responsibility;

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  1. FLEURBAEY, Marc & MANIQUET, François, . "Help the low skilled or let the hardworking thrive? A study of fairness in optimal income taxation," CORE Discussion Papers RP -1970, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  8. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
  9. Yukihiro Nishimura, 2004. "Tax implementability of fair allocations," Review of Economic Design, Springer, vol. 9(1), pages 31-41, December.
  10. Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-59, October.
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