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Redistribution, production inefficiency and decentralized efficiency

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  • Hisahiro Naito

Abstract

This paper analyzes the role of production distortion in income redistribution in an international trade model. In particular, it examines the role of the Stolper and Samuelson effect on efficient income redistribution. It first shows that production inefficiency can be part of a Pareto-efficient tax system for a small country when there is an asymmetric information problem between the government and individuals. Second, the paper shows that such production inefficiency is not only Pareto-improving for a small country, but is also essential in achieving worldwide tax-constrained Pareto-efficient allocation. These two results suggest important implications for commercial policies. Copyright Springer Science + Business Media, LLC 2006

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  • Hisahiro Naito, 2006. "Redistribution, production inefficiency and decentralized efficiency," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(5), pages 625-640, September.
    • Handle: RePEc:kap:itaxpf:v:13:y:2006:i:5:p:625-640
    DOI: 10.1007/s10797-006-6551-0
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    Cited by:

    1. Antràs, Pol & de Gortari, Alonso & Itskhoki, Oleg, 2017. "Globalization, inequality and welfare," Journal of International Economics, Elsevier, vol. 108(C), pages 387-412.
    2. Kohl, Miriam & Richter, Philipp M., 2023. "Unilateral tax policy in the open economy," Journal of International Economics, Elsevier, vol. 145(C).
    3. Philippe Bontems & Estelle Gozlan, 2018. "Trade, environment, and income inequality: An optimal taxation approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(4), pages 557-581, August.
    4. Kohl, Miriam, 2020. "Redistribution, selection, and trade," Journal of International Economics, Elsevier, vol. 122(C).

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