An Axiomatic Proof of Mirrlees' Formula
AbstractMirrlees' optimal income tax formula has never been proven rigorously, and it is hard to understand it in economic terms. We prove an analogous formula for an economy with finitely many persons. This is easy and allows a simple economic interpretation. Thereafter, Mirrlees' original formula is derived by means of a limit theorem. The analysis also clarifies the discussion between Revesz and Saez published as "Communications" below in this issue of PF/FP. It shows which formula is correct and how the methodological problems, in particular the circularity problem, can be dealt with.
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Bibliographic InfoArticle provided by in its journal Public Finance = Finances publiques.
Volume (Year): 53 (1998)
Issue (Month): 3-4 ()
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Other versions of this item:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
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- 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.
- Homburg, Stefan, 2010. "Allgemeine Steuerlehre," EconStor Books, ZBW - German National Library of Economics, number 92547.
- Tim Lohse & Peter Lutz & Christian Thomann, 2013.
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- Lohse, Tim & Lutz, Peter F. & Thomann, Christian, 2011. "Investments in the Human Capital of the Socially Disadvantaged Children - Effects on Redistribution," Hannover Economic Papers (HEP) dp-484, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- Revesz, John T, 1998. "Some Comments on the Reply by Saez and the Article by Homburg [Comparing Elasticities-Based Optimal Income Tax Formulas] [An Axiomatic Proof of Mirrlees' Formula]," Public Finance = Finances publiques, , vol. 53(3-4), pages 486-88.
- Stefan Homburg & Tim Lohse, 2005.
"Optimal Taxes and Transfers under Partial Information,"
Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik),
Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 225(6), pages 622-629, November.
- Homburg, Stefan & Lohse, Tim, 2004. "Optimal Tax-Transfer-Schemes under Partial Information," Hannover Economic Papers (HEP) dp-298, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
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