Normative Analysis with Societal Constraints
AbstractThis paper examines the question of achieving a societal consensus around redistributive policies. Its extent is measured by the degree of work participation among the different skill classes that populate the economy. This consensus is driven both by the material incentives and heterogeneous preferences for leisure of each skill class, and an endogenous social norm, which embodies societal attitudes towards distributive justice. Results for optimal redistributive taxation in the presence of an extensive margin of participation show that when a norm is present, participation taxes are generally lower (resp. higher) than when it is not, whenever it enters as a benefit or cost for participants (resp. a cost for non-participants). In the event of multiple participation equilibria, it is examined how changes in the progressivity of taxation may induce shifts in equilibria. This multiplicity of equilibria is thereafter exploited as a constraint on the social planner, which views societal consensus as an objective.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4305.
Date of creation: 2013
Date of revision:
optimal taxation; societal consensus; social norms; work participation; distributive justice; redistribution;
Find related papers by JEL classification:
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
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