Consuming your way to efficiency: Public goods provision through non-distortionary tax lotteries

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Consuming your Way to Efficiency: Public Goods Provision through Non-Distortionary Tax Lotteries Terms of use: Documents in EconStor may AbstractWe revisit the classical result that financing a pure public good through taxation of private consumption is inefficient. To this standard setup we add a consumption contest in which consumers can win a prize. We show that an appropriately chosen contest-which we call a 'tax lottery'-can correct the distortion in private consumption while, at the same time, inducing efficient provision of the public good and balancing the government's budget. The result does not depend on whether the public good is provided exogenously or dependent on actual tax revenue. We show that neither pure fundraising contests nor a sales tax combined with a 'simple' lottery can induce efficiency in the standard environment.JEL-Code: C700, D700, H000.

Social Welfare and Behavioral Public Policies

“…This policy is still in place, according to Giebe and Schweinzer (2013) because it proved so successful. Some other countries that have applied the LTRP are the Philippines, Malaysia, Chile, Puerto Rico and Brazil.…”

“…Such systems will also help to reduce falsification of VAT receipts. Another problem with the Taiwanese system was the fact that as the lottery numbers come per invoice and not per amount spent, there is an incentive for customers to pay for every single item separately in order to get more receipts (Giebe and Schweinzer, 2013). A possible solution for this specific problem would be paying a lottery prize that is proportional to the invoice value.…”

“…Some other countries that have applied the LTRP are the Philippines, Malaysia, Chile, Puerto Rico and Brazil. According to Giebe and Schweinzer (2013) shows a huge increase of VAT collected compared to the previous year. Furthermore, since the Slovakian version of the LTRP allows private citizens to verify if the business owners correctly registered the transaction that originated the invoices, notifications to the tax authority of tax evading business is 25 times higher compared to the pre-LTRP introduction period 49 .…”

Agreeing on Efficient Emissions Reduction

“…The most directly related studies of public goods provision problems relating to contests that we are aware of are Morgan (2000) and Giebe & Schweinzer (2014). 6 Morgan (2000) studies a lottery mechanism which uses proceeds obtained from ticket sales for the provision of a public good.…”

“…Using a fixed precision contest, he obtains the result that contests are unable to implement exact efficiency. Giebe & Schweinzer (2014) explore the possibility of the efficient provision of a public good through 5 The incentive scheme we propose is based on a verifiable, relative ranking of abatement efforts. We do not require the verifiability or cardinal measurement of these efforts.…”