Randomization In Optimal Income Tax Schedules
AbstractThe optimal income tax problem, since it requires self-selection constraints which define nonconvex feasible sets, is one of the many problems in economics for which randomization in the solution may be desirable. For a two-class economy. we characterize the optimal random tax schedules and we present necessary and sufficient conditions for the desirability of local randomization. The standard single-crossing restriction on preferences is not required for these results. We also show that randomization can be beneficial without violating (ex post as well as ex ante) horizontal equity. Lastly, we give an example to demonstrate that the gains from randomization may be large.
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Bibliographic InfoPaper provided by Florida - College of Business Administration in its series Papers with number 89-6.
Length: 26 pages
Date of creation: 1989
Date of revision:
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Postal: UNIVERSITY OF FLORIDA, COLLEGE OF BUSINESS ADMINISTRATION, GAINESVILLE FLORIDA 33620 U.S.A.
Phone: (352) 392-2397 x1399
Fax: (352) 392-2086
Web page: http://warrington.ufl.edu/
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income ; taxes ; economic models;
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