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Should the Good and the Selfish be Taxed Differently?

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  • Ngo Van Long
  • Frank Stähler

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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Suggested Citation

  • Ngo Van Long & Frank Stähler, 2012. "Should the Good and the Selfish be Taxed Differently?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 932-948, September.
  • Handle: RePEc:bla:scandj:v:114:y:2012:i:3:p:932-948
    DOI: j.1467-9442.2012.01705.x
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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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