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Public Input Provision in an Optimal Income Tax Model

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  • Mutsumi Matsumoto

Abstract

This paper derives and examines the provision rule for public inputs within a two-class framework of optimal income taxation. If income redistribution policies must be designed under a self-selection constraint because the ability of any particular worker is private information, public input provision is used as a means of relaxing this constraint. This use of public inputs for helping income redistribution entails a deviation from the first-best provision rule. The resultant inefficiency is due to the impact of public input provision on the wage differential between workers with different abilities.

Suggested Citation

  • Mutsumi Matsumoto, 2001. "Public Input Provision in an Optimal Income Tax Model," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(1), pages 1-12, December.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200112)58:1_12:pipiao_2.0.tx_2-7
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    Cited by:

    1. Matthew Weinzierl, 2014. "Revisiting the Classical View of Benefits-Based Taxation," 2014 Meeting Papers 344, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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