Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2005:7: Optimal Redistributive Taxation when Government’s and Agents’ Preferences Differ

Sören Blomquist () and Luca Micheletto ()
Additional contact information
Sören Blomquist: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Luca Micheletto: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: Paternalism, merit goods and specific egalitarianism are concepts we sometimes meet in the literature. The thing in common is that the policy maker does not fully respect the consumer sovereignty principle and design policies according to some other criterion than individuals’ preferences. Using the self-selection approach to tax problems developed by Stiglitz (1982) and Stern (1982), the paper provides a characterization of the properties of an optimal redistributive mixed tax scheme in the general case when the government evaluates individuals’ well-being using a different utility function than the one maximized by private agents.

Keywords: optimal taxation; behavioral economics; paternalism; merit goods; non-welfarism

JEL-codes: H21; H23

22 pages, February 21, 2005

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