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Taxation and Tournaments

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Author Info

  • Persson, Mats

    ()
    (Institute for International Economic Studies, Stockholm University)

  • Sandmo, Agnar

    ()
    (Norwegian School of Economics and Business Administration)

Abstract

This paper analyzes the effects of progressive taxes on labour supply and income distribution in the context of the rank-order tournament model originally developed by Lazear and Rosen (1981). We show conditions under which a more progressive tax schedule will cause so large general equilibrium effects that the inequality in disposable income will actually increase. We also show that a non-zero redistributive tax is always optimal if society’s welfare function displays inequality aversion; this result always holds, regardless of behavioral responses and general equilibrium effects.

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Bibliographic Info

Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 715.

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Length: 23 pages
Date of creation: 24 May 2002
Date of revision:
Handle: RePEc:hhs:iiessp:0715

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Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Phone: +46-8-162000
Fax: +46-8-161443
Web page: http://www.iies.su.se/
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Keywords: TBA;

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References

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  1. Kjetil Storesletten & Chris I. Telmer & Amir Yaron, 2000. "Consumption and Risk Sharing Over the Life Cycle," NBER Working Papers 7995, National Bureau of Economic Research, Inc.
  2. Lindbeck, Assar & Nyberg, Sten, 2001. "Raising Children to Work Hard: Altruism, Work Norms and Social Insurance," Working Paper Series 557, Research Institute of Industrial Economics.
  3. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2001. "A positive theory of geographic mobility and social insurance," Economics Working Papers 604, Department of Economics and Business, Universitat Pompeu Fabra.
  4. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2001. "The survival of the welfare state," Economics Working Papers 603, Department of Economics and Business, Universitat Pompeu Fabra.
  5. Storesletten, Kjetil & Telmer, Chris & Yaron, Amir, 2001. "Asset Pricing with Idiosyncratic Risk and Overlapping Generations," CEPR Discussion Papers 3065, C.E.P.R. Discussion Papers.
  6. Svensson, Lars & Woodford, Michael, 2000. "Indicator Variables for Optimal Policy," Seminar Papers 688, Stockholm University, Institute for International Economic Studies.
  7. Calvó-Armengol, Antoni & Zenou, Yves, 2003. "Job Matching, Social Network and Word-of-Mouth Communication," IZA Discussion Papers 771, Institute for the Study of Labor (IZA).
  8. Calmfors, Lars & Forslund, Anders & Hemström, Maria, 2002. "Does Active Labour Market Policy Work? Lessons from the Swedish Experiences," Seminar Papers 700, Stockholm University, Institute for International Economic Studies.
  9. Lindbeck, Assar & Persson, Mats, 2002. "The Gains from Pension Reform," Seminar Papers 712, Stockholm University, Institute for International Economic Studies.
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Citations

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Cited by:
  1. Geir H. Bjertnæs, 2012. "Promotion rat race and public policy," Discussion Papers 686, Research Department of Statistics Norway.
  2. Geir Bjertnaes, 2012. "Promotion Rat Race and Public Policy," CESifo Working Paper Series 3781, CESifo Group Munich.
  3. Lindbeck, Assar, 2002. "The European Social Model: Lessons for Developing Countries," Working Paper Series 581, Research Institute of Industrial Economics.

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