Optimal Tax and Expenditure Policy with Aggregate Uncertainty

Felix J. Bierbrauer

American Economic Journal: Microeconomics, 2014, vol. 6, issue 1, 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.

JEL-codes: D82 H21 H23 H41 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/mic.6.1.205
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Citations: View citations in EconPapers (10)

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