Capitation taxes and the regulation of professional services

Bruno Deffains () and Dominique Demougin ()
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Bruno Deffains: University Paris Pantheon Assas
Dominique Demougin: University Paris Pantheon Assas

European Journal of Law and Economics, 2023, vol. 55, issue 2, No 1, 167-193

Abstract: Abstract We analyze the introduction of capitation taxes as a mean of regulating professional services in a Principal-Agent moral-hazard framework. Although the tax increases cost and lowers participation, we find that it reduces the marginal price associated with quality. The optimal capitation system balances these opposing effects. We use the setup to derive comparative statics results and discuss possible impacts of improvements in ICT on occupational regulation. We find that the results are more ambiguous than often suggested.

Keywords: Professional regulation; Capitation taxes; Moral hazard; Monitoring (search for similar items in EconPapers)
JEL-codes: D82 K23 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10657-023-09762-z

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