Tagging and Income Taxation: Theory and an Application
AbstractWe derive a set of analytical results for optimal income taxation with tags using quasilinear preferences and a Rawlsian social welfare function. Secondly, assuming a constant elasticity of labor supply and log-normality of the skills distribution, we analytically identify the winners and losers of tagging. Third, we prove that if the skills distribution in one group first-order stochastically dominates the other, tagging calls for redistribution from the former to the latter group. Finally, we calibrate our model to the US workers using gender as tag. Welfare implications are dramatic. Only male high-wage earners lose. Everyone else gains, some substantially. (JEL H21, H23, H24)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Economic Policy.
Volume (Year): 2 (2010)
Issue (Month): 1 (February)
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
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