Pigou Meets Mirrlees: On the Irrelevance of Tax Distortions for the Second-Best Pigouvian Tax

This paper extends the Mirrlees (1971) model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities. It is demonstrated that the optimal second-best tax on an externality-generating good should not be corrected for the marginal cost of public funds. The reason is that the marginal cost of public funds equals unity in the optimal tax system, since marginal distortions of taxation are equal to marginal distributional gains. The Pigouvian tax needs to be modified, however, if polluting commodities or environmental quality are more complementary to leisure than non-polluting commodities are.marginal cost of public funds, optimal environmental taxation, optimal redistribution, externalities

Analyzing a Flat Income Tax in the Netherlands

A flat tax rate on income has gained popularity in European countries. This paper assesses the attractiveness of such a flat tax in achieving redistributive objectives with the least cost to labour market performance. We do so by using a detailed applied general equilibrium model for the Netherlands. The model is empirically grounded in the data and encompasses decisions on hours worked, labour force participation, skill formation, wage bargaining between unions and firms, matching frictions, and a wide variety of institutional details. The simulations suggest that the replacement of the current tax system in the Netherlands by a flat rate will harm labour market performance if aggregate income inequality is contained. This finding bolsters the notion that a linear tax is less efficient than a non-linear tax to obtain redistributive goals.flat tax, labour market, general equilibrium, equity, optimal taxation

Pigou meets mirrlees: On the irrelevance of tax distortions for the second-best Pigouvian tax

This paper extends the Mirrlees (1971) model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities. It is demonstrated that the optimal second-best tax on an externality-generating good should not be corrected for the marginal cost of public funds. The reason is that the marginal cost of public funds equals unity in the optimal tax system, since marginal distortions of taxation are equal to marginal distributional gains. The Pigouvian tax needs to be modified, however, if polluting commodities or environmental quality are more complementary to leisure than non-polluting commodities are

A game of persuasion:influencing persuasive game appraisals through presentation frames and recommendation sources

Introduction: As games made with the explicit or implicit purpose of influencing players’ attitudes, persuasive games afford a new way for individuals to reflect and elaborate on real-world issues or topics. While research points to effects of these games on their players, little is known about their practical impact. The current study focuses on the decision-making process that takes place between first hearing about a game and deciding to play it. Three elements in a game’s presentation to potential players were explored: (1) the way it is framed as an entertaining experience, (2) the way it is framed as intending to persuade its players, and (3) whether it comes recommended by automated systems or through electronic word-of-mouth. These factors were chosen in line with theoretical arguments around framing, eudaimonia, and source credibility. Methods: A two (entertainment frame: hedonic versus eudaimonic) by two (persuasive intent frame: obfuscated versus explicit) by two (source of recommendation: system- versus peer-based) between-subjects experimental design was performed across (N = 310) randomly distributed participants. Measures were adapted from previous research and included selection and play behavior, attitudes, and obtrusiveness of persuasive intent, among others. Results and Discussion: Results show that frames need to be congruent to be effective, with the most effective stimuli being those where persuasive intent was clear and players could expect to engage meaningfully. Peer recommendations led to greater play intention than system-based varieties. While intention to play positively related to actual play behavior, this relationship was likely the result of avid game players displaying more interest in the game regardless of the study’s manipulations. Implications are drawn from the advantages of being open about persuasive intent and the composition and drivers of a persuasive game’s target audience.</p

Analyzing a flat income tax in the Netherlands

A flat tax rate on income has gained popularity in European countries. This paper assesses the attractiveness of such a flat tax in achieving redistributive objectives with the least cost to labour market performance. We do so by using a detailed applied general equilibrium model for the Netherlands. The model is empirically grounded in the data and encompasses decisions on hours worked, labour force participation, skill formation, wage bargaining between unions and firms, matching frictions, and a wide variety of institutional details. The simulations suggest that the replacement of the current tax system in the Netherlands by a flat rate will harm labour market performance if aggregate income inequality is contained. This finding bolsters the notion that a linear tax is less efficient than a non-linear tax to obtain redistributive goals

Analyzing a Flat Income Tax in the Netherlands

A flat tax rate on income has gained popularity in European countries. This paper assesses the attractiveness of such a flat tax in achieving redistributive objectives with the least cost to labour market performance. We do so by using a detailed applied general equilibrium model for the Netherlands. The model is empirically grounded in the data and encompasses decisions on hours worked, labour force participation, skill formation, wage bargaining between unions and firms, matching frictions, and a wide variety of institutional details. The simulations suggest that the replacement of the current tax system in the Netherlands by a flat rate will harm labour market performance if aggregate income inequality is contained. This finding bolsters the notion that a linear tax is less efficient than a non-linear tax to obtain redistributive goals