Public Good Provision and the Comparative Statics of Optimal Nonlinear Income Taxation
Weymark, John A.
Comparative static properties of the solution to an optimal nonlinear income tax problem are provided for a model in which the government both designs an income tax schedule for redistributive purposes and provides a public good optimally. There are two types of individuals, distinguished by their skill levels, who have the same quasilinear preferences for labour supply and the consumption of a private and a public good. The parameters for which comparative statics are obtained are the weights in a weighted utilitarian social welfare function, the prices of the private and public goods, a taste parameter that measures the onerousness of working, and the individual skill levels.