Distortionary Taxation and the Free-Rider Problem

Felix Bierbrauer ()
Additional contact information
Felix Bierbrauer: Max Planck Institute for Research on Collective Goods, Bonn

No 2006_6, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: This paper derives a version of the Samuelson rule, which takes not only the marginal costs of public funds into account but also the desirability of preference revelation. Under a linear income tax more able individuals suffer from a larger utility loss if taxes are raised to cover the cost of public good provision. This implies that these individuals are tempted to understate their valuation of the public good. Likewise, less productive individuals are inclined to exaggerate their valuation. These incentive concerns require the use of excessive taxes. They ensure a truthful revelation of preferences for the public good. Under an optimal utilitarian tax constitution, individuals are not granted influence on public good provision if the taxes needed to induce informative behavior are prohibitively high.

Keywords: Public Good Provision; Revelation of Preferences; Distortionary Taxation; Two-dimensional Heterogeneity (search for similar items in EconPapers)
JEL-codes: D71 D82 H21 H41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2006-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.coll.mpg.de/pdf_dat/2006_06online.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2006_06

Access Statistics for this paper

More papers in Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods Contact information at EDIRC.
Bibliographic data for series maintained by Marc Martin ().