Envy, Inequity Aversion, and Optimal Income Taxation
Abstract
The paper analyzes the optimal income taxation policy when inequity aversion exists among taxpayers. The influence of inequity aversion on the optimal income tax scheme depends on whether taxpayers are concerned about inequality in wages or in rents (i.e., wages minus effort costs). If agents compare wages, then a more productive agent who is averse to inequity produces more output than the first-best level of output, while a less productive agent produces less than the second-best level of the output in a standard adverse-selection model. Therefore, the trade-off between efficiency and equity becomes more serious than the trade-off in a reference case without inequity aversion. Conversely, when agents´ disutility from inequity arises from inequality in rents, the trade-off between efficiency and equity may become either more serious or milder than in the reference case.Download Info
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic Info
Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
Volume (Year): 65 (2009)
Issue (Month): 1 (March)
Pages: 1-20
Contact details of provider:
Web page: http://www.mohr.de/fa
Order Information:
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Email:
Related research
Keywords: inequity aversion; adverse selection; redistribution; trade-off;Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- J4 - Labor and Demographic Economics - - Particular Labor Markets
References
No references listed on IDEASYou can help add them by filling out this form.
Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Jona Linde & Joep Sonnemans, 2012. "Social Preferences in Private Decisions," Tinbergen Institute Discussion Papers 12-003/1, Tinbergen Institute.
Lists
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.Statistics
Access and download statisticsCorrections
When requesting a correction, please mention this item's handle: RePEc:mhr:finarc:urn:sici:0015-2218(200903)65:1_1:eiaaoi_2.0.tx_2-iFor technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Wolpert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.