Public Provision of Private Goods and Nondistortionary Marginal Tax Rates

Sören Blomquist, Vidar Christiansen and Luca Micheletto

American Economic Journal: Economic Policy, 2010, vol. 2, issue 2, 1-27

Abstract: Using an optimal taxation model combined with a previously neglected scheme of public provision of private goods, we show that there is an efficiency gain if public provision of selected goods replaces market purchases and that efficiency requires marginal income tax rates to be higher than if the goods were purchased in the market. Part of the marginal tax serves the same role as a market price and conveys information about a real social cost of working more hours. It might be that economies with higher marginal tax rates have less severe distortions than economies with lower marginal tax rates. (JEL H21, H42, I38)

JEL-codes: H21 H42 I38 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/pol.2.2.1
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Citations: View citations in EconPapers (66)

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Related works:
Working Paper: Public Provision of Private Goods and Nondistortionary Marginal Tax Rates (2008)
Working Paper: Public Provision of Private Goods and Nondistortionary Marginal Tax Rates (2007)
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