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International Tax and Public Finance

, Volume 12, Issue 3, pp 319–334 | Cite as

Financing Public Goods with Income Taxation: Provision Rules vs. Provision Level

  • Thomas GaubeEmail author
Article

Abstract

Due to the use of distortionary taxation, many believe that real-world economies should attain a lower level of public expenditures than in a situation where lump-sum taxes are available. The present paper examines this hypothesis by means of the two-type self-selection model of income taxation. Based on the findings of Boadway and Keen (1993), 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 separability assumption of Christiansen (1981) leads to under-provision of the public good in the income tax optimum.

Keywords

income taxation public goods 

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Copyright information

© Springer Science + Business Media, Inc. 2005

Authors and Affiliations

  1. 1.Max Planck Institute for Research on Collective GoodsBonnGermany

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