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Budget Balancedness and Optimal Income Taxation

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Author Info
Marcus Berliant (Washington University in St. Louis)
Frank H. Page Jr. (University of Alabama)

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Abstract

We make two main contributions to the theory of optimal income taxation. First, assuming conditions sufficient for existence of a Pareto optimal income tax and public goods mechanism, we show that if agents’ preferences satisfy an extended notion of single crossing called capacity constrained single crossing, then there exists a Pareto optimal income tax and public goods mechanism that is budget balancing. Second, we show that, even without capacity constrained single crossing, existence of a budget balancing, Pareto optimal income tax and public goods mechanism is guaranteed if the set of agent types contains no atoms.

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File URL: http://129.3.20.41/eps/pe/papers/0407/0407016.pdf
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Publisher Info
Paper provided by EconWPA in its series Public Economics with number 0407016.

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Length: 44 pages
Date of creation: 31 Jul 2004
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Handle: RePEc:wpa:wuwppe:0407016

Note: Type of Document - pdf; pages: 44
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Web page: http://129.3.20.41

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Related research
Keywords: Optimal Income Taxation; Public Goods; Budget Balancing; Single Crossing; Nonatomic Economy; Atomless Economy;

Other versions of this item:

Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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  1. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Blackwell Publishing, vol. 46(2), pages 263-82, April. [Downloadable!] (restricted)
  2. Conley, John P. & Wooders, Myrna H., 2001. "Tiebout Economies with Differential Genetic Types and Endogenously Chosen Crowding Characteristics," Journal of Economic Theory, Elsevier, vol. 98(2), pages 261-294, June. [Downloadable!] (restricted)
  3. Artstein, Zvi, 1979. "A note on fatou's lemma in several dimensions," Journal of Mathematical Economics, Elsevier, vol. 6(3), pages 277-282, December. [Downloadable!] (restricted)
  4. Page, Frank H, Jr, 1992. "Mechanism Design for General Screening Problems with Moral Hazard," Economic Theory, Springer, vol. 2(2), pages 265-81, April.
  5. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Blackwell Publishing, vol. 38(114), pages 175-208, April. [Downloadable!] (restricted)
  7. Konishi, Hideo, 1995. "A Pareto-improving commodity tax reform under a smooth nonlinear income tax," Journal of Public Economics, Elsevier, vol. 56(3), pages 413-446, March. [Downloadable!] (restricted)
  8. Berliant, Marcus & Page, Frank H, Jr, 2001. "Income Taxes and the Provision of Public Goods: Existence of an Optimum," Econometrica, Econometric Society, vol. 69(3), pages 771-84, May.
  9. Berliant, Marcus & Page, Frank Jr., 1996. "Incentives and income taxation: the implementation of individual revenue requirement functions," Ricerche Economiche, Elsevier, vol. 50(4), pages 389-400, December. [Downloadable!] (restricted)
  10. James A. Mirrlees, 1976. "The Optimal Structure of Incentives and Authority Within an Organization," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 105-131, Spring. [Downloadable!] (restricted)
  11. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring. [Downloadable!] (restricted)
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