Pawns and Queens Revisited: Public Provision of Private Goods When Individuals Make Mistakes

Jukka Pirttilä and Sanna Tenhunen
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Sanna Tenhunen: School of Management, University of Tampere

No 540, Working Papers from Tampere University, Faculty of Management and Business, Economics

Abstract: This paper analyses the optimal tax policy and public provision of private goods when individuals di¤er in two respects: income-earning ability and rationality. Publicly provided goods should be overprovided or subsidised, relative to the decentralised optimum, if society\'s marginal valuation of them exceeds the individual valuation and if these goods help relax the self-selection constraints, formulated in a new way. Optimal marginal income tax rates are shown to di¤er from the standard rules if publicly provided goods and labour supply are related.

Keywords: Behavioral economics; optimal taxation; public provision. (search for similar items in EconPapers)
JEL-codes: H21 H42 (search for similar items in EconPapers)
Pages: pages
Date: 2005-03
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Citations: View citations in EconPapers (3)

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http://urn.fi/urn:isbn:951-44-6271-8 First version, 2005 (application/pdf)

Related works:
Journal Article: Pawns and queens revisited: public provision of private goods when individuals make mistakes (2008)
Working Paper: Pawns and Queens Revisited: Public Provision of Private Goods when Individuals make Mistakes (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:tam:wpaper:0540

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