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A contribution to the theory of optimal utilitarian income taxation

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  • Hellwig, Martin F.

Abstract

The paper provides a new formulation of the Mirrlees-Seade theorem on the positivity of the optimal marginal income tax, under weaker assumptions and in a more general model. The formulation of the theorem is independent of whether the model involves finitely many types or a continuous type distribution. The formal argument makes the underlying logic transparent, relating the mathematics to the economics and showing precisely how each assumption enters the analysis.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 91 (2007)
Issue (Month): 7-8 (August)
Pages: 1449-1477

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Handle: RePEc:eee:pubeco:v:91:y:2007:i:7-8:p:1449-1477

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Web page: http://www.elsevier.com/locate/inca/505578

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  1. Ebert, Udo, 1992. "A reexamination of the optimal nonlinear income tax," Journal of Public Economics, Elsevier, vol. 49(1), pages 47-73, October.
  2. Matthews, Steven & Moore, John, 1987. "Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening," Econometrica, Econometric Society, vol. 55(2), pages 441-67, March.
  3. Brunner, Johann K., 1993. "A note on the optimum income tax," Journal of Public Economics, Elsevier, vol. 50(3), pages 445-451, March.
  4. Stefan Homburg, 2001. "The Optimal Income Tax: Restatement and Extensions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(4), pages 363-395, November.
  5. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
  6. Martin Hellwig, 2008. "A Maximum Principle for Control Problems with Monotonicity Constraints," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2008_04, Max Planck Institute for Research on Collective Goods.
  7. Besley, T. & Coate, S., 1991. "The Design Of Income Maintenance Programs," Papers 74, Princeton, Woodrow Wilson School - John M. Olin Program.
  8. Emmanuel Saez, 2000. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," NBER Working Papers 7708, National Bureau of Economic Research, Inc.
  9. Joseph E. Stiglitz, 1981. "Self-Selection and Pareto Efficient Taxation," NBER Working Papers 0632, National Bureau of Economic Research, Inc.
  10. Seade, Jesus, 1982. "On the Sign of the Optimum Marginal Income Tax," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 637-43, October.
  11. Philippe Choné & Guy Laroque, 2006. "Should Low Skilled Work be Subsidized ?," Working Papers 2006-08, Centre de Recherche en Economie et Statistique.
  12. Hellwig, Martin F., 2007. "A contribution to the theory of optimal utilitarian income taxation," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1449-1477, August.
  13. Hellwig, Martin F., 2007. "The undesirability of randomized income taxation under decreasing risk aversion," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 791-816, April.
  14. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 263-82, April.
  15. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  16. Guy Laroque, 2005. "Income Maintenance and Labor Force Participation," Econometrica, Econometric Society, vol. 73(2), pages 341-376, 03.
  17. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
  18. Guesnerie Roger & Seade Jesus, 1981. "Nonlinear pricing in a finite economy," CEPREMAP Working Papers (Couverture Orange) 8118, CEPREMAP.
  19. Hellwig, Martin F., 1986. "The optimal linear income tax revisited," Journal of Public Economics, Elsevier, vol. 31(2), pages 163-179, November.
  20. J. A. Mirrlees, 1976. "Optimal Tax Theory: A Synthesis," Working papers 176, Massachusetts Institute of Technology (MIT), Department of Economics.
  21. Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
  22. Christiansen, Vidar, 1983. " Some Important Properties of the Social Marginal Utility of Income," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(3), pages 359-71.
  23. Weymark, John A., 1986. "A reduced-form optimal nonlinear income tax problem," Journal of Public Economics, Elsevier, vol. 30(2), pages 199-217, July.
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