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Pareto efficient income taxation without single-crossing

Author

Listed:
  • Spencer Bastani

    (Linnaeus University
    Uppsala Center for Fiscal Studies
    Uppsala Center for Labor Studies
    CESifo)

  • Sören Blomquist

    (Uppsala Center for Fiscal Studies
    CESifo
    Uppsala University)

  • Luca Micheletto

    (Uppsala Center for Fiscal Studies
    University of Milan
    Bocconi University)

Abstract

We provide a full characterization of a two-type optimal nonlinear income tax model where the single-crossing condition is violated due to an assumption that agents differ both in terms of market abilities and in terms of their needs for a work-related good. We set up a Pareto-efficient tax problem and analyze the entire second-best Pareto-frontier, highlighting several non-standard results, such as the possibility of income re-ranking relative to the laissez-faire and gaps in the Pareto-frontier.

Suggested Citation

  • Spencer Bastani & Sören Blomquist & Luca Micheletto, 2020. "Pareto efficient income taxation without single-crossing," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 55(3), pages 547-594, October.
    • Handle: RePEc:spr:sochwe:v:55:y:2020:i:3:d:10.1007_s00355-020-01257-z
    DOI: 10.1007/s00355-020-01257-z
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    References listed on IDEAS

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    Cited by:

    1. Felix J. Bierbrauer & Pierre C. Boyer & Emanuel Hansen, 2023. "Pareto‐Improving Tax Reforms and the Earned Income Tax Credit," Econometrica, Econometric Society, vol. 91(3), pages 1077-1103, May.

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