Research project This project aims at further developing the theory of optimal taxation and public good provision.
Existing research on optimal taxation and public good provision typically takes a narrow perspective on inequality by focusing on income (and to some extent wealth) inequality, while neglecting inequality in the access to environmental amenities or human capital. Furthermore, it often neglects individual preferences for equality, social status, or other social outcomes. The purpose of the research project is to integrate these aspects in the study of optimal redistributive taxation, (ii) public good provision, and (iii) policies designed to affect the distribution of environmental amenities.
The Swedish Research Council.
Professor Olof Johansson-Stenman, University of Gothenburg.
Inequalities measured in terms of income and wealth have increased substantially in recent decades, which has spurred a renewed interest in the measurement of inequality per se as well as in the implications thereof for optimal redistributive taxation and public expenditure. Existing research in the latter area typically takes a narrow perspective on inequality by focusing on income (and to some extent wealth) inequality, while neglecting other
important dimensions of inequality such as the access to environmental amenities and human capital. Furthermore, and contrary to much empirical evidence, existing research is largely based on model-economies populated by Homo Economicus agents, which are motivated solely by their own economic outcomes and not by experienced inequality, their relative standing in various dimensions, or other social outcomes.
We will develop a framework where inequality is affected by interactions between productivity differences, individual preferences for equality and relative position, concerns for environmental quality, and human capital
formation. We also intend to take a broader perspective on inequality than earlier research by including the access to benefits from the natural environment as well as human capital. The overall purpose is to analyze the implications of this multidimensional inequality for i) optimal redistributive taxation, ii) public good provision, and iii) environmental policies affecting the distribution of environmental amenities.
