PAWNS AND QUEENS REVISITED: PUBLIC PROVISION OF PRIVATE GOODS WHEN INDIVIDUALS MAKE MISTAKES
Pirttilä, Jukka; Tenhunen, Sanna (2005)
Pirttilä, Jukka
Tenhunen, Sanna
Tampereen yliopisto
2005
This publication is copyrighted. You may download, display and print it for Your own personal use. Commercial use is prohibited.
Julkaisun pysyvä osoite on
https://urn.fi/urn:isbn:951-44-6271-8
https://urn.fi/urn:isbn:951-44-6271-8
Tiivistelmä
This paper analyses the optimal tax policy and public provision of private goods when individuals di¤er in two respects: income-earning ability and rationality. Publicly provided goods should be overprovided or subsidised, relative to the decentralised optimum, if society\'s marginal valuation of them exceeds the individual valuation and if these goods help relax the self-selection constraints, formulated in a new way. Optimal marginal income tax rates are shown to di¤er from the standard rules if publicly provided goods and labour supply are related.