Collectively Incentive Compatible Tax Systems

39 Pages Posted: 1 Oct 2006

See all articles by Felix J. Bierbrauer

Felix J. Bierbrauer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Date Written: 09/2006

Abstract

This paper assumes that individuals possess private information both about their abilities and about their valuation of a public good. Individuals can undertake collective actions on order to manipulate the tax system and the decision on public good provision. Consequently, an implementable scheme of taxation has to be collectively incentive compatible. If preferences are additively separable, then an implementable tax systems has the following properties: (i) tax payments do not depend on public goods preferences and (ii) there is no scope for a collective manipulation of public goods preferences. For a quasilinear economy, the optimal tax system is explicitly characterized.

Keywords: Optimal Taxation, Public Good Provision, Revelation of Preferences, Information Aggregation

JEL Classification: D71, D82, H21, H41

Suggested Citation

Bierbrauer, Felix J., Collectively Incentive Compatible Tax Systems (09/2006). MPI Collective Goods Preprint No. 2006/24. Available at SSRN: https://ssrn.com/abstract=933588 or http://dx.doi.org/10.2139/ssrn.933588

Felix J. Bierbrauer (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

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