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Tagging with leisure needs

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  • Pierre Pestieau
  • Maria Racionero

Abstract

We study optimal redistributive taxes when individuals differ in two characteristics—earning ability and leisure needs—assumed to be imperfectly correlated. Individuals have private information about their abilities but needs are observable. With different levels of observable needs the population can be separated into groups and needs may be used as a tag. We first assume that the social planner considers individuals should be compensated for their leisure needs and characterize the optimal redistributive policy, and the extent of compensation for needs, with tagging. We also consider an alternative social objective where individuals are deemed responsible for their needs. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Pierre Pestieau & Maria Racionero, 2015. "Tagging with leisure needs," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 45(4), pages 687-706, December.
  • Handle: RePEc:spr:sochwe:v:45:y:2015:i:4:p:687-706
    DOI: 10.1007/s00355-015-0875-6
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    More about this item

    Keywords

    H21; H41;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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