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Public Provision of Private Goods and Nondistortionary Marginal Tax Rates
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics, Uppsala Center for Fiscal Studies.
2010 (English)In: American Economic Journal: Economic Policy, ISSN 1945-7731, Vol. 2, no 2, 1-27 p.Article in journal (Refereed) Published
Abstract [en]

Using an optimal taxation model combined with a previously neglected scheme of public provision of private goods, we show that there is an efficiency gain if public provision of selected goods replaces market purchases and that efficiency requires marginal income tax rates to be higher than if the goods were purchased in the market. Part of the marginal tax serves the same role as a market price and conveys information about a real social cost of working more hours. It might be that economies with higher marginal tax rates have less severe distortions than economies with lower marginal tax rates. (JEL H21, H42, I38).

Place, publisher, year, edition, pages
2010. Vol. 2, no 2, 1-27 p.
National Category
Economics and Business
URN: urn:nbn:se:uu:diva-140163DOI: 10.1257/pol.2.2.1ISI: 000284559500002OAI: oai:DiVA.org:uu-140163DiVA: diva2:383089
Available from: 2011-01-04 Created: 2011-01-04 Last updated: 2011-01-04Bibliographically approved

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