Pigouvian Income Taxation
CESifo, Munich, 2024
CESifo Working Paper No. 11174
![](https://cesifo.org/DocImg/cesifo1_wp11174.jpg?c=1719218560)
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.
Public Finance
Energy and Climate Economics