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Some Results on the Comparative Statics of Optimal Categorical Transfer Payments

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  • Alan D. Viard

    (Federal Reserve Bank of Dallas)

Abstract

To alleviate equity-efficiency trade-offs, tax transfer systems pay categorical transfers to groups defined by characteristics correlated with earnings ability. The author examines the comparative statics of categorical transfer payments in a linear income tax model through analysis of first-order conditions and numerical calculations. The analysis sharpens previous results on the size of categorical transfers, the resulting reduction in the income tax rate, and the associated welfare gain. Notably, the author finds that categorical transfers should vary more across groups when earnings ability is more equal within each group, when labor supply is more elastic, and when less revenue is required for public goods.

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Bibliographic Info

Article provided by in its journal Public Finance Review.

Volume (Year): 29 (2001)
Issue (Month): 2 (March)
Pages: 148-180

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Handle: RePEc:sae:pubfin:v:29:y:2001:i:2:p:148-180

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Cited by:
  1. Matthew C. Weinzierl, 2012. "Why do we Redistribute so Much but Tag so Little? The principle of equal sacrifice and optimal taxation," NBER Working Papers 18045, National Bureau of Economic Research, Inc.
  2. Robin BOADWAY & Pierre PESTIEAU, 2006. "Tagging and redistributive taxation," Annales d'Economie et de Statistique, ENSAE, issue 83-84, pages 123-147.
  3. N. Gregory Mankiw & Matthew Weinzierl, 2009. "The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution," NBER Working Papers 14976, National Bureau of Economic Research, Inc.
  4. Louis Kaplow, 2007. "Optimal income transfers," International Tax and Public Finance, Springer, vol. 14(3), pages 295-325, June.
  5. Helmuth Cremer & Firouz Gahvari & Jean-Marie Lozachmeur, 2010. "Tagging and Income Taxation: Theory and an Application," American Economic Journal: Economic Policy, American Economic Association, vol. 2(1), pages 31-50, February.

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