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Optimal Categorical Transfer Payments: The Welfare Economics of Limited Lump-Sum Redistribution

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  • Viard, Alan D

Abstract

Despite their importance in tax-transfer systems, categorical transfer payments, based on (nearly) exogenous characteristics such as disability or date of birth, have been deemphasized in optimal-tax analysis. I use the well-developed theory of first-best redistribution to clarify the welfare economics of categorical transfers, which are a form of limited lump-sum redistribution. The comparison to first-best redistribution explains how categorical transfers affect groups' labor supplies and utility levels, why the use of categorical transfers is inversely related to the planner's inequality aversion, and why their use reduces the optimal income tax rate. Copyright 2001 by Blackwell Publishing Inc.

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 3 (2001)
Issue (Month): 4 ()
Pages: 483-500

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Handle: RePEc:bla:jpbect:v:3:y:2001:i:4:p:483-500

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Cited by:
  1. Blomquist, Sören & Micheletto, Luca, 2003. "Age Related Optimal Income Taxation," Working Paper Series, Uppsala University, Department of Economics 2003:7, Uppsala University, Department of Economics.
  2. Spencer Bastani, 2013. "Gender-based and couple-based taxation," International Tax and Public Finance, Springer, Springer, vol. 20(4), pages 653-686, August.
  3. N. Gregory Mankiw & Matthew Weinzierl, 2010. "The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 2(1), pages 155-76, February.
  4. Laurence Jacquet, 2014. "Tagging and redistributive taxation with imperfect disability monitoring," Social Choice and Welfare, Springer, Springer, vol. 42(2), pages 403-435, February.
  5. Laurence jacquet, 2013. "Tagging and Redistributive Taxation with Imperfect Disability Monitoring," THEMA Working Papers 2013-01, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  6. Robin Boadway & Pierre Pestieau, 2006. "Tagging and Redistributive Taxation," Working Papers, Queen's University, Department of Economics 1071, Queen's University, Department of Economics.
  7. Parsons, Donald O., 2011. "Double-Sided Moral Hazard in Job Displacement Insurance Contracts," IZA Discussion Papers 6003, Institute for the Study of Labor (IZA).
  8. Helmuth Cremer & Firouz Gahvari & Jean-Marie Lozachmeur, 2010. "Tagging and Income Taxation: Theory and an Application," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 2(1), pages 31-50, February.

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