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Pawns and queens revisited: public provision of private goods when individuals make mistakes

  • Jukka Pirttilä
  • Sanna Tenhunen

    ()

This paper analyses the optimal tax policy and public provision of private goods when individuals di¤er in two respects: income-earning ability and rationality. Publicly provided goods should be overprovided or subsidised, relative to the decentralised optimum, if society\'s marginal valuation of them exceeds the individual valuation and if these goods help relax the self-selection constraints, formulated in a new way. Optimal marginal income tax rates are shown to di¤er from the standard rules if publicly provided goods and labour supply are related.

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File URL: http://hdl.handle.net/10.1007/s10797-007-9045-9
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Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 15 (2008)
Issue (Month): 5 (October)
Pages: 599-619

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Handle: RePEc:kap:itaxpf:v:15:y:2008:i:5:p:599-619
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102915

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  20. Blomquist, Sören & Micheletto, Luca, 2005. "Optimal Redistributive Taxation when Government’s and Agents’ Preferences Differ," Working Paper Series 2005:7, Uppsala University, Department of Economics.
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  25. Sören Blomquist & Vidar Christiansen, 2003. "Is there a Case for Public Provision of Private Goods if Preferences are Heterogeneous? An Example with Day Care," CESifo Working Paper Series 938, CESifo Group Munich.
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