Optimal redistribution with unobservable preferences for an observable merit good
This paper considers a government that seeks both to redistribute income and to encourage or discourage the consumption of a certain good. This good is assumed to be either a merit or demerit good. Individuals differ in their exogenous income and in their preferences for the merit good. The government can perfectly observe the level of consumption of the merit good. However, it cannot observe neither income nor preferences. The only observable variable is thus each individual's consumption of the merit good. In order to account for merit good considerations, we consider a modification of the utilitarian social welfare function in which the government imposes uniform preferences, despite the heterogeneous individual preferences, at a level which will depend on the merit or demerit nature of the observable good. We derive the optimal nonlinear redistributive policy and compare our results to the ones that would be obtained under a utilitarian social welfare function that respects the own preferences of individual.
|Date of creation:||01 Feb 1999|
|Date of revision:|
|Contact details of provider:|| Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cremer, H. & Marchand, M. & Pestieau, P., .
"Interregional redistribution through tax surcharge,"
CORE Discussion Papers RP
1218, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Helmuth Cremer & Maurice Marchand & Pierre Pestieau, 1996. "Interregional redistribution through tax surcharge," International Tax and Public Finance, Springer, vol. 3(2), pages 157-173, May.
- Joseph E. Stiglitz, 1981.
"Self-Selection and Pareto Efficient Taxation,"
NBER Working Papers
0632, National Bureau of Economic Research, Inc.
- Besley, Timothy, 1988. "A simple model for merit good arguments," Journal of Public Economics, Elsevier, vol. 35(3), pages 371-383, April.
- FLEURBAEY, Marc & MANIQUET, François, 1998.
"Optimal income taxation: and ordinal approach,"
CORE Discussion Papers
1998065, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
- Nichols, Albert L & Zeckhauser, Richard J, 1982. "Targeting Transfers through Restrictions on Recipients," American Economic Review, American Economic Association, vol. 72(2), pages 372-77, May.
- Mirrlees, J. A., 1976.
"Optimal tax theory : A synthesis,"
Journal of Public Economics,
Elsevier, vol. 6(4), pages 327-358, November.
- Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
- Stiglitz, Joseph E., 1987.
"Pareto efficient and optimal taxation and the new new welfare economics,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 15, pages 991-1042
- Joseph E. Stiglitz, 1987. "Pareto Efficient and Optimal Taxation and the New New Welfare Economics," NBER Working Papers 2189, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:1999009. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS)
If references are entirely missing, you can add them using this form.