Udo Ebert () (Institut fur Volkswirtschaftslehre, Carl von Ossietzky Universität Oldenburg) Patrick Moyes () (CNRS, IDEP and GRAPE, Universite Montesquieu Bordeaux IV)
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When incomes are exogenously given, a progressive tax structure reduces inequality in the sensethat the Lorenz curve of after tax incomes is nowhere below that of before tax incomes whatever the circumstances as it was shown by U. Jakobsson (Journal of Public Economics 5 (1976), 161-168) The relevance of this standard result is however seriously limited since real-world incomes are determined by the working decisions of the agents in the economy. The paper aims at investigating the implications for e_ective progression of relaxing the assumption of exogenous incomes when individuals have the same preferences but di_erent talents. We _rst extend the standard result to the case where agents' working decisions are fully taken into account and we conclude that it is generally impossible to disentangle the respective contributions to inequality reduction of the tax schedule and agents' preferences. We next demonstrate that an elasticity of labour supply which is non-decreasing in productivities is both necessary and su_cient for a proportional tax schedule to result in less unequally distributed incomes. Journal of Economic Literature
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Paper provided by Institut d'economie publique (IDEP), Marseille, France in its series IDEP Working Papers with number
0309.
Find related papers by JEL classification: H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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