Second-best Random Redistribution
AbstractRandom taxation may be optimal when the taxpayers differ in their attitudes towards risk, so that tax randomization enables the government to relax the incentive constraints. The paper provides a necessary and sufficient condition for local random deviations to be welfare improving in a neighborhood of a nonrandom optimum. It also derives conditions satisfied by a global random optimum. A full analytical derivation is given for a two goods two agents economy with isoelastic utilities.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 11062.
Length: 33 pages
Date of creation: Oct 2011
Date of revision:
Random taxation; stochastic contract; second best; tax evasion.;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-14 (All new papers)
- NEP-IUE-2011-11-14 (Informal & Underground Economics)
- NEP-ORE-2011-11-14 (Operations Research)
- NEP-PBE-2011-11-14 (Public Economics)
- NEP-PUB-2011-11-14 (Public Finance)
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