A note on optimal income taxation, public goods provision and robust mechanism design

Felix Bierbrauer

Journal of Public Economics, 2009, vol. 93, issue 5-6, pages 667-670

Abstract: This paper extends the model of optimal income taxation due to Mirrlees (Mirrlees, J., 1971. An exploration in the theory of optimum income taxation. Review of Economic Studies 38, 175-208) and includes private information on public goods preferences. A mechanism design approach is used to establish the following result: If policies are required to be robustly implementable in the sense of Bergemann and Morris (Bergemann, D., Morris, S., 2005. Robust mechanism design. Econometrica 73, 1771-1813), then the optimality conditions in the extended model with uncertainty about tax and expenditure policies are the same as in the standard model of optimal income taxation. The paper provides a foundation for a widely-used assumption in public finance, namely that individuals optimize their behavior subject to a predetermined and commonly known tax system.

Keywords: Optimal; taxation; Public; goods; provision; Revelation; of; preferences; Mechanism; design (search for similar items in EconPapers)
Date: 2009
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Persistent link: http://EconPapers.repec.org/RePEc:eee:pubeco:v:93:y:2009:i:5-6:p:667-670

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