SFB 303 Discussion Paper No. A - 595
Author: Gaube, Thomas
Title: Efficient Public Good Provision with Nonlinear Income Taxation
Abstract: Due to the use of distortionary taxation,
real-world economies should attain a lower
level of public expenditures than one might suspect from the analysis of
artificial models where lump-sum taxes are assumed to be available.
The paper examines this popular hypothesis by means of the two-type
self-selection model of income taxation. I provide sufficient
conditions for both a lower and a higher level of public expenditures
in second best than in first best. Contrary to conventional
intuition, these results do not in the first place depend on whether
the (second-best) income tax is distortive, but on whether public
expenditures reduce the incentive of high-ability agents to imitate
less productive individuals.
Keywords: income taxation, public goods
JEL-Classification-Number: H41, H21
Creation-Date: April 1999
Unfortunately this paper is not available online. Please contact us to order a hardcopy.
SFB 303 Homepage