Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Comparison of Optimal Tax Policies when Compensation or Responsibility Matter

Contents:

Author Info

  • Laurence Jacquet
  • Dirk Van de gaer

Abstract

This paper examines optimal redistribution in a model with high- and low-skilled individuals with heterogeneous tastes for labor. We compare the extent to which optimal policies based on different normative criteria obey the principles of compensation (for differential skills) and responsibility (for preferences for labor) when labor supply is along the extensive margin. With heterogeneity in skills and preferences, traditional Welfarist criteria including Utilitarianism present unappealing policy recommendations in some scenarios as they fail to take compensation and responsibility issues into account. Criteria from the social choice literature perform better in this regard in first-and second-best. More importantly, these equality of opportunity criteria push the second-best policy away from an Earned Income Tax Credit and in the direction of a Negative Income Tax.

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.
File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-03/cesifo1_wp2997.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2997.

as in new window
Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:ces:ceswps:_2997

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: optimal income taxation; equality of opportunity; heterogeneous preferences for labor;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2007. "Welfare reform in European countries: a microsimulation analysis," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 117(516), pages 1-44, 01.
  2. PESTIEAU, Pierre & RACIONERO, Maria, . "Optimal redistribution with unobservable disability: welfarist versus non-welfarist social objectives," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -2157, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Robin Boadway & Katherine Cuff & Maurice Marchand, 1999. "Optimal Income Taxation With Quasi-Linear Preferences Revisited," Working Papers, Queen's University, Department of Economics 984, Queen's University, Department of Economics.
  4. Marc Fleurbaey & Fran�Ois Maniquet, 2007. "Help the Low Skilled or Let the Hardworking Thrive? A Study of Fairness in Optimal Income Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(3), pages 467-500, 06.
  5. Erwin Ooghe & Erik Schokkaert & Dirk gaer, 2007. "Equality of Opportunity versus Equality of Opportunity Sets," Social Choice and Welfare, Springer, Springer, vol. 28(2), pages 209-230, February.
  6. Alberto Alesina & George-Marios Angeletos, 2004. "Fairness and Redistribution," Levine's Bibliography 122247000000000283, UCLA Department of Economics.
  7. MARCHAND, Maurice & PESTIEAU, Pierre & RACIONERO, Maria, . "Optimal redistribution when different workers are indistinguishable," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1701, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Diamond, Peter A, 1998. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates," American Economic Review, American Economic Association, American Economic Association, vol. 88(1), pages 83-95, March.
  9. Philippe Chone & Guy Laroque, 2001. "Optimal Incentives for Labor Force Participation," Working Papers, Centre de Recherche en Economie et Statistique 2001-26, Centre de Recherche en Economie et Statistique.
  10. Ravi Kanbur & Jukka Pirttilä & Matti Tuomala, 2004. "Non-Welfarist Optimal Taxation and Behavioral Public Economics," CESifo Working Paper Series 1291, CESifo Group Munich.
  11. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2006. "The Optimal Income Taxation of Couples," NBER Working Papers 12685, National Bureau of Economic Research, Inc.
  12. Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2004. "Disability Testing and Retirement," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4773, C.E.P.R. Discussion Papers.
  13. FLEURBAEY, Marc & MANIQUET, François, . "Fair income tax," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1845, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Robin Boadway & Maurice Marchand & Pierre Pestieau & María del Mar Racionero, 2002. "Optimal Redistribution with Heterogeneous Preferences for Leisure," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(4), pages 475-498, October.
  15. Diamond, Peter & Sheshinski, Eytan, 1995. "Economic aspects of optimal disability benefits," Journal of Public Economics, Elsevier, Elsevier, vol. 57(1), pages 1-23, May.
  16. Roemer, John E. & Aaberge, Rolf & Colombino, Ugo & Fritzell, Johan & Jenkins, Stephen P. & Marx, Ive & Page, Marianne & Pommer, Evert & Ruiz-Castillo, Javier & San Segundo, Maria Jesus & Tranaes, Torb, 2000. "To what extent do fiscal regimes equalize opportunities for income acquisition among citizens?," ISER Working Paper Series 2000-19, Institute for Social and Economic Research.
  17. Marc Fleurbaey & François Maniquet, 2006. "Compensation and responsibility," Working Papers halshs-00121367, HAL.
  18. Dirk Van de gaer & Marc Fleurbaey & Walter Bossert, 1999. "Responsibility, talent, and compensation: A second-best analysis," Review of Economic Design, Springer, Springer, vol. 4(1), pages 35-55.
  19. Bossert, Walter, 1995. "Redistribution mechanisms based on individual characteristics," Mathematical Social Sciences, Elsevier, Elsevier, vol. 29(1), pages 1-17, February.
  20. Laurence Jacquet & Dirk Van de gaer, 2010. "A Comparison of Optimal Tax Policies when Compensation or Responsibility Matter," CESifo Working Paper Series 2997, CESifo Group Munich.
  21. Marc Fleurbaey, 2005. "Health, Wealth, and Fairness," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(2), pages 253-284, 05.
  22. Fleurbaey, Marc, 2012. "Fairness, Responsibility, and Welfare," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199653591, October.
  23. Louis Kaplow, 2008. "Optimal Policy with Heterogeneous Preferences," NBER Working Papers 14170, National Bureau of Economic Research, Inc.
  24. Roland Iwan Luttens & Erwin Ooghe, 2007. "Is it Fair to 'Make Work Pay'?," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 74(296), pages 599-626, November.
  25. Hellwig, Martin F., 2007. "A contribution to the theory of optimal utilitarian income taxation," Journal of Public Economics, Elsevier, Elsevier, vol. 91(7-8), pages 1449-1477, August.
  26. Marc Fleurbaey & François Maniquet, 2005. "Fair social orderings when agents have unequal production skills," Social Choice and Welfare, Springer, Springer, vol. 24(1), pages 93-127, 09.
  27. Ebert, Udo, 1992. "A reexamination of the optimal nonlinear income tax," Journal of Public Economics, Elsevier, Elsevier, vol. 49(1), pages 47-73, October.
  28. Schokkaert, Erik & Van de gaer, Dirk & Vandenbroucke, Frank & Luttens, Roland Iwan, 2004. "Responsibility sensitive egalitarianism and optimal linear income taxation," Mathematical Social Sciences, Elsevier, Elsevier, vol. 48(2), pages 151-182, September.
  29. Helmuth Cremer & Jean-Marie Lozachmeur & Pierre Pestieau, 2004. "Optimal Retirement and Disability Benefits with Audit," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 60(3), pages 278-, September.
  30. Marc Fleurbaey & Walter Bossert, 1996. "Redistribution and compensation (*)," Social Choice and Welfare, Springer, Springer, vol. 13(3), pages 343-355.
  31. Diamond, P., 1980. "Income taxation with fixed hours of work," Journal of Public Economics, Elsevier, Elsevier, vol. 13(1), pages 101-110, February.
  32. Fleurbaey Marc, 1995. "Three Solutions for the Compensation Problem," Journal of Economic Theory, Elsevier, Elsevier, vol. 65(2), pages 505-521, April.
  33. Kaplow Louis, 2008. "Optimal Policy with Heterogeneous Preferences," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 8(1), pages 1-30, September.
  34. Roland Hodler, 2009. "Redistribution and Inequality in a Heterogeneous Society," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 76(304), pages 704-718, October.
  35. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(3), pages 1039-1073, August.
  36. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(114), pages 175-208, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. JACQUET, Laurence & VAN DE GAER, Dirk, . "A comparison of optimal tax policies when compensation or responsibility matter," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -2421, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. RAMOS, Xavier & VAN DE GAER, Dirk, 2012. "Empirical approaches to inequality of opportunity: principles, measures, and evidence," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2012026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Ooghe, Erwin & Peichl, Andreas, 2010. "Fair and Efficient Taxation under Partial Control: Theory and Evidence," IZA Discussion Papers 5388, Institute for the Study of Labor (IZA).
  4. Laurence Jacquet & Dirk Van de gaer, 2013. "Politiques fiscales optimales pour les bas revenus et principe de compensation," THEMA Working Papers 2013-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  5. Giacomo Valletta, 2014. "Health, fairness and taxation," Social Choice and Welfare, Springer, Springer, vol. 43(1), pages 101-140, June.
  6. Ooghe, Erwin & Peichl, Andreas, 2014. "Fair and efficent taxation under partial control," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 14-002, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2997. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).

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.