Labour Income Uncertainty, Taxation and Public Good Provision

16 Pages Posted: 11 Apr 2007

See all articles by Jukka Pirttila

Jukka Pirttila

United Nations - World Institute for Development Economics Research (UNU/WIDER); Tampere University of Technology

Matti Tuomala

University of Tampere

Date Written: 0000

Abstract

This article examines optimal nonlinear income taxation, commodity taxation and public good provision under income uncertainty in a moral hazard framework. Uniform commodity taxation and the Samuelson rule for public good provision are desirable under similar conditions as in the conventional tax model. Deviations from these rules is warranted if one can encourage effort by subsidising certain goods and overproviding public goods. We also determine a rule for the optimal marginal income tax rate and provide some numerical simulations. Conditions for the validity of the solution procedure used in this class of models, the first-order approach, are also explored.

Suggested Citation

Pirttila, Jukka and Tuomala, Matti, Labour Income Uncertainty, Taxation and Public Good Provision (0000). The Economic Journal, Vol. 117, Issue 518, pp. 567-582, March 2007. Available at SSRN: https://ssrn.com/abstract=978580 or http://dx.doi.org/10.1111/j.1468-0297.2007.02030.x

Jukka Pirttila (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6B
Helsinki, FIN-00160
Finland

Tampere University of Technology ( email )

P.O. 541, Korkeakoulunkatu 8 (Festia building)
Tampere, FI-33101
Finland

Matti Tuomala

University of Tampere ( email )

P.O. Box 607
Tampere, FIN-33101
Finland
+358-3-2156031 (Phone)
+358-3-2157254 (Fax)

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