Optimal policy with heterogeneous preferences
By: Louis Kaplow.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- working paper 14170; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 14170.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Optimal policy rules--including those regarding income taxation, commodity taxation, public goods, and externalities--are typically derived in models with homogeneous preferences.  This article reconsiders many central results for the case in which preferences for commodities, public goods, and externalities are heterogeneous.  When preference differences are observable, standard second-best results in basic settings are unaffected, except those for the optimal income tax.  Optimal levels of income taxation may be higher, the same, or lower on types who derive more utility from various goods, depending on the nature of preference differences and the concavity of the social welfare function.  When preference differences are unobservable, all policy rules may change.  The determinants of even the direction of optimal rule adjustments are many and subtle"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/23/2008.

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