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Should the Good and the Selfish be Taxed Differently?

Listed author(s):
  • 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
Handle: RePEc:mtl:montec:07-2010
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  1. Gary S. Becker, 1974. "A Theory of Social Interactions," NBER Working Papers 0042, National Bureau of Economic Research, Inc.
  2. Marc Fleurbaey & François Maniquet, 2006. "Fair income tax," Post-Print hal-00246842, HAL.
  3. FLEURBAEY, Marc & MANIQUET, François, "undated". "Help the low skilled or let the hardworking thrive? A study of fairness in optimal income taxation," CORE Discussion Papers RP 1970, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Moore, John & Repullo, Rafael, 1988. "Subgame Perfect Implementation," Econometrica, Econometric Society, vol. 56(5), pages 1191-1220, September.
  5. Yukihiro Nishimura, 2004. "Tax implementability of fair allocations," Review of Economic Design, Springer;Society for Economic Design, vol. 9(1), pages 31-41, December.
  6. Angeletos, George-Marios & Alesina, Alberto, 2005. "Fairness and Redistribution," Scholarly Articles 4553009, Harvard University Department of Economics.
  7. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
  8. Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-1159, October.
  9. 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.
  10. 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.
  11. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
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