Optimal Tax and Expenditure Policy with Aggregate Uncertainty
American Economic Journal: Microeconomics
vol. 6,
no. 1, February 2014
(pp. 205-57)
Abstract
We study optimal income taxation and public-goods provision under the assumption that the cross-section distributions of productive abilities or public-goods preferences are not known a priori. A conventional Mirrleesian treatment is shown to provoke manipulations of the policy mechanism by individuals with similar interests. The analysis therefore incorporates a requirement of coalition-proofness. The main result is that increased public-goods provision is associated with a more distortionary and a more redistributive tax system. With a conventional Mirrleesian treatment, the level of public-goods provision is not related to how distortionary or redistributive the tax system is.Citation
Bierbrauer, Felix J. 2014. "Optimal Tax and Expenditure Policy with Aggregate Uncertainty." American Economic Journal: Microeconomics, 6 (1): 205-57. DOI: 10.1257/mic.6.1.205Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- H21 Taxation and Subsidies: Efficiency; Optimal Taxation
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H41 Public Goods
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