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Should the Good and the Selfish be Taxed Differently?

  • LONG, Ngo van
  • STÄHLER, Frank

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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Paper provided by Centre interuniversitaire de recherche en économie quantitative, CIREQ in its series Cahiers de recherche with number 07-2010.

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Length: 16 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:mtl:montec:07-2010
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  1. 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.
  2. Alberto Alesina & George-Marios Angeletos, 2004. "Fairness and Redistribution," Levine's Bibliography 122247000000000283, UCLA Department of Economics.
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  8. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  9. Marc Fleurbaey & Fran�Ois Maniquet, 2007. "Help the Low Skilled or Let the Hardworking Thrive? A Study of Fairness in Optimal Income Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(3), pages 467-500, 06.
  10. Moore, John & Repullo, Rafael, 1988. "Subgame Perfect Implementation," Econometrica, Econometric Society, vol. 56(5), pages 1191-1220, September.
  11. Yukihiro Nishimura, 2004. "Tax implementability of fair allocations," Review of Economic Design, Springer, vol. 9(1), pages 31-41, December.
  12. Lucy F. Ackert & Jorge Martinez-Vazquez & Mark Rider, 2007. "Social Preferences And Tax Policy Design: Some Experimental Evidence," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 487-501, 07.
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