Optimal redistribution with unobservable disability: Welfarist versus non-welfarist social objectives
AbstractThis paper examines the optimal non-linear income and commodity tax when the same labor disutility can receive two alternative interpretations, taste for leisure or disability, but the disability is not readily observable. We compare the optimal policy under alternative social objectives, welfarist and non-welfarist, and conclude that the non-welfarist objective, in which the planner gives a higher weight to the disutility of labor of the disabled individuals, is the only reasonable specification. It has some foundation in the theory of responsibility; further, unlike the other specifications it yields an optimal solution that may involve a lower labor supply requirement from disabled individuals.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 53 (2009)
Issue (Month): 6 (August)
Contact details of provider:
Web page: http://www.elsevier.com/locate/eer
Optimal non-linear taxation Quasi-linear preferences Asymmetric information Responsibility;
Other versions of this item:
- 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).
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
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