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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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References

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  1. Svensson, Lars E. O. & Woodford, Michael, 2000. "Indicator variables for optimal policy," Working Paper Series 0012, European Central Bank.
  2. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2003. "The Survival of the Welfare State," American Economic Review, American Economic Association, vol. 93(1), pages 87-112, March.
  3. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2005. "A Positive Theory Of Geographic Mobility And Social Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 263-303, 02.
  4. 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.
  5. Storesletten, Kjetil & Telmer, Chris & Yaron, Amir, 2002. "Asset pricing with idiosyncratic risk and overlapping generations," Seminar Papers 703, Stockholm University, Institute for International Economic Studies.
  6. Calvo-Armengol, Antoni & Zenou, Yves, 2005. "Job matching, social network and word-of-mouth communication," Journal of Urban Economics, Elsevier, vol. 57(3), pages 500-522, May.
  7. Lindbeck, Assar & Persson, Mats, 2002. "The Gains from Pension Reform," Working Paper Series 580, Research Institute of Industrial Economics.
  8. Assar Lindbeck & Sten Nyberg, 2006. "Raising Children to Work Hard: Altruism, Work Norms, and Social Insurance," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1473-1503, November.
  9. Calmfors, Lars & Forslund, Anders & Hemström, Maria, 2002. "Does active labour market policy work? Lessons from the Swedish experiences," Working Paper Series 2002:4, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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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. Lindbeck, Assar, 2002. "The European Social Model: Lessons for Developing Countries," Working Paper Series 581, Research Institute of Industrial Economics.
  3. Geir Bjertnaes, 2012. "Promotion Rat Race and Public Policy," CESifo Working Paper Series 3781, CESifo Group Munich.

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