| Thomas Gaube, University of Bonn |
| Efficient Public Good Provision with Nonlinear Income Taxation |
| Session: C-12-7 Wednesday 16 August 2000 by Gaube, Thomas |
| Due to the use of distortionary taxation, many believe that 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. In particular, it is shown that the widely employed assumptions of Christiansen (1981) lead to under-provision of the public good in the income tax optimum. |
| Submitted paper full-text in .pdf |