Evaluation of Public Projects under Optimal Taxation

Christiansen, Vidar

doi:10.2307/2297157

Cited by 106 publications

(92 citation statements)

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“…Consumption and leisure are both assumed to be normal goods. This paper allows for preference 7 It is based on earlier contributions by Ramsey (1927), Mirrlees (1971), Diamond and Mirrlees (1971), Sheshinski (1972), Diamond (1975), Christiansen (1981), Boadway and Keen (1993), Kaplow (1996) and Sandmo (1998). 8 Jacobs (2010) analyzes the model in general-equilibrium settings allowing for a representative firm operating a constant returns-to-scale technology and none of the results change.…”

Section: Individualsmentioning

confidence: 99%

“…Only in that special case one can unambiguously conclude that the marginal cost of public funds 4 Some authors have allowed for heterogeneous agents, see, for example, the contributions by Browning and Johnson (1984) and Allgood and Snow (1998), but these studies focus mainly on the efficiency costs of taxation. Others have explicitly introduced distributional aspects of public goods and taxes, see, e.g., Christiansen (1981), Boadway and Keen (1993), Kaplow (1996), Sandmo (1998), Slemrod and Yitzhaki (2001), and Dahlby (2008).…”

Section: Introductionmentioning

confidence: 99%

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The marginal cost of public funds is one at the optimal tax system

Jacobs

2018

Int Tax Public Finance

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This paper develops a Mirrlees framework with skill and preference heterogeneity to analyze optimal linear and nonlinear redistributive taxes, optimal provision of public goods, and the marginal cost of public funds (MCF). It is shown that the MCF equals one at the optimal tax system, for both lump-sum and distortionary taxes, for linear and nonlinear taxes, and for both income and consumption taxes. By allowing for redistributional concerns, the marginal excess burden of distortionary taxes is shown to be equal to the marginal distributional gain at the optimal tax system. Consequently, the modified Samuelson rule should not be corrected for the marginal cost of public funds. Outside the optimum, the marginal cost of public funds for distortionary taxes can be either smaller or larger than one. The findings of this paper have potentially important implications for applied tax policy and social cost-benefit analysis. Keywords

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Section: Individualsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The marginal cost of public funds is one at the optimal tax system

Jacobs

2018

Int Tax Public Finance

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“…5 The use of coercion to levy contributions from people who do not bene…t from the public goods at all raises concerns about equity as well as the possibility of power abuse. 6 The use of coercion is also incompatible with the contractarian approach to government that stood behind Lindahl's (1919) development of the theory of public goods. 7 Given that governments usually do have a power of coercion, Lindahl's approach may seem unrealistic.…”

Section: Introductionmentioning

confidence: 99%

The provision and pricing of excludable public goods: Ramsey–Boiteux pricing versus bundling

Hellwig

2007

Journal of Public Economics

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This paper studies the relation between Bayesian mechanism design and the Ramsey-Boiteux approach to the provision and pricing of excludable public goods. For a large economy with private information about individual preferences, the two approaches are shown to be equivalent if and only if, in addition to incentive compatibility and participation constraints, the …nal allocation of private-good consumption and admission tickets to public goods satis…es a condition of renegotiation proofness. Without this condition, a mechanism involving mixed bundling, i.e. combination tickets at a discount, is superior.

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“…The mechanism design problem will be to choose an allocation that maximizes the welfare functional (2.3) over a set of admissible allocations. 6 Admissibility will be de…ned with reference to conditions of feasibility, incentive compatibility, renegotiation proofness, and, in part of the analysis, individual rationality. An allocation is said to be feasible if it satis…es i (n; ) 1 (2.4) for i 2 J ne and Z…”

Section: A Model With Multiple Public Goods and Endogenous Productionmentioning

confidence: 99%

“…As a prominent exception, Atkinson and Stiglitz (1976) have argued that the Ramsey-Boiteux theory of indirect taxation and publicsector pricing is moot if one allows for direct taxation with nonlinear tax schedules. Christiansen (1981) and Boadway and Keen (1994) have extended the Atkinson-Stiglitz critique to models with public-good provision. However, they assumed that public-goods preferences are common knowledge so that there is no problem of preference revelation.…”

Section: Introductionmentioning

confidence: 99%

Optimal Income Taxation, Public-Goods Provision and Public-Sector Pricing: A Contribution to the Foundations of Public Economics

Hellwig

2004

SSRN Journal

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The paper develops an integrated model of optimal nonlinear income taxation, public-goods provision and pricing in a large economy with private information about labour productivities and public-goods preferences and with binding participation constraints and/or distributive concerns. With binding participation constraints, it is desirable to use nonlinear income taxes as well as admission fees for public-goods …nance. With (su¢ ciently large) inequality aversion, it is desirable to use admission fees as well as income taxes for redistribution. In either case, optimal income taxes and admission fees on excludable public goods satisfy a version of the Mirrlees and Ramsey-Boiteux tax formulae. A renegotiation proofness condition on the consumption side of the allocation is used to write the incentive constraints for the multidimensional hidden characteristics as multiple unidimensional constraints.

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Evaluation of Public Projects under Optimal Taxation

Cited by 106 publications

References 0 publications

The marginal cost of public funds is one at the optimal tax system

The marginal cost of public funds is one at the optimal tax system

The provision and pricing of excludable public goods: Ramsey–Boiteux pricing versus bundling

Optimal Income Taxation, Public-Goods Provision and Public-Sector Pricing: A Contribution to the Foundations of Public Economics

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