Pigouvian Income Taxation

Lassi Ahlvik, Matti Liski and Mikael Mäkimattila

No 11174, CESifo Working Paper Series from CESifo

Abstract: This paper develops a mechanism design approach to study externalities and re-distribution. The mechanism screens individuals’ social weights to strike a balance among broad distributional objectives, incentives to work, and incentives to reduce externalities. The welfare-optimal allocation can be decentralized through income taxation, defining income-dependent externality payments. Two applications use individual-level administrative data on incomes, pollution measures, and financial burdens to demonstrate how population characteristics shape the optimal policy on carbon emissions.

Keywords: Pigouvian taxation; optimal income taxation; inequality; climate change (search for similar items in EconPapers)
JEL-codes: D82 H21 H23 Q54 Q58 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-des, nep-ene, nep-env, nep-pbe and nep-pub
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Working Paper: Pigouvian Income Taxation (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11174

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