Optimal Democratic Mechanisms for Taxation and Public Good Provision

Felix Bierbrauer () and Marco Sahm
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Felix Bierbrauer: Max Planck Institute for Research on Collective Goods, Bonn
Marco Sahm: University of Munich

No 2008_09, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: We study the interdependence of optimal tax and expenditure policies. An optimal policy requires that information on preferences is made available. We first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on public good provision face an own incentive scheme that differs from the tax system. We then study democratic mechanisms with the property that tax payers vote over public goods. Under such a mechanism, efficiency cannot be reached and welfare from public good provision declines as the inequality between rich and poor individuals increases.

Keywords: Public goods; optimal taxation; two-dimensional heterogeneity; asymmetric information (search for similar items in EconPapers)
JEL-codes: D71 D72 D82 H41 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-03
New Economics Papers: this item is included in nep-cdm, nep-cta, nep-pbe, nep-pol and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2008_9

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