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Optimal redistribution when different workers are indistinguishable

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  • Maurice Marchand
  • Pierre Pestieau
  • María Racionero

Abstract

Using the standard non linear income and commodity taxation framework, we examine the optimal policy to be adopted when the same labour disutility can receive two opposite interpretations: taste for leisure and activity limitation. In the absence of complete information about individual characteristics, an income tax does not allow distinguishing lazy from handicapped individuals. One may rely, however, on a combination of commodity and income taxes to redistribute from the former to the latter when they differ in their preferences for commodities.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 36 (2003)
Issue (Month): 4 (November)
Pages: 911-922

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Handle: RePEc:cje:issued:v:36:y:2003:i:4:p:911-922

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References

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  1. Beaudry, Paul & Blackorby, Charles, 2006. "Taxes and Employment Subsidies in Optimal Redistribution Programs," The Warwick Economics Research Paper Series (TWERPS) 766, University of Warwick, Department of Economics.
  2. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
  3. Diamond, P., 1994. "Optimal Income Taxation: An Exemple with a U-Shaped Pattern of Optimal Marginal Tax Rates," Working papers 94-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. repec:fth:louvco:2001/25 is not listed on IDEAS
  5. Katherine Cuff, 1998. "Optimality of Workfare with Heterogeneous Preferences," Working Papers 968, Queen's University, Department of Economics.
  6. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
  7. Robin Boadway & Maurice Marchand & Pierre Pestieau & María del Mar Racionero, 2002. "Optimal Redistribution with Heterogeneous Preferences for Leisure," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(4), pages 475-498, October.
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Citations

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Cited by:
  1. L. Jacquet & D. Van De Gaer, 2009. "A comparison of optimal tax policies when compensation or responsibility matter," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/615, Ghent University, Faculty of Economics and Business Administration.
  2. Louis Kaplow, 2010. "Optimal Control of Externalities in the Presence of Income Taxation," STICERD - Public Economics Programme Discussion Papers 02, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Kaplow, Louis, 2006. "On the undesirability of commodity taxation even when income taxation is not optimal," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1235-1250, August.
  4. Laurence Jacquet, 2014. "Tagging and redistributive taxation with imperfect disability monitoring," Social Choice and Welfare, Springer, vol. 42(2), pages 403-435, February.
  5. Laurence Jacquet, 2010. "Take it or Leave it: Take-up, Optimal Transfer Programs, and Monitoring," CESifo Working Paper Series 3018, CESifo Group Munich.
  6. Louis Kaplow, 2006. "Optimal Control of Externalities in the Presence of Income Taxation," NBER Working Papers 12339, National Bureau of Economic Research, Inc.
  7. Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2004. "Disability Testing and Retirement," CEPR Discussion Papers 4773, C.E.P.R. Discussion Papers.
  8. Laurence Jacquet & Dirk Van de gaer, 2013. "Politiques fiscales optimales pour les bas revenus et principe de compensation," THEMA Working Papers 2013-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  9. PESTIEAU, Pierre & RACIONERO, Maria, 2007. "Optimal redistribution with unobservable disability: welfarist versus non-welfarist social objectives," CORE Discussion Papers 2007035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. 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.
  11. Laurence JACQUET, 2009. "Take it or Leave it : Optimal Transfer Programs, Monitoring and Takeup," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2009003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  12. Louis Kaplow, 2008. "Optimal Policy with Heterogeneous Preferences," NBER Working Papers 14170, National Bureau of Economic Research, Inc.

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