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When Redistribution Leads to Regressive Taxation

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Author Info
Cyril Hariton (Toulouse Business School)
Gwenäel Piaser () (Department of Economics, University Of Venice Ca’ Foscari)
Gwenaël Piaser

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Abstract

We introduce labor contracts, in a framework of optimal redistribution: firms have some local market power and try to discriminate among heterogeneous workers. In this setting we show that if the firms have perfect information, i.e, they perfectly discriminate against workers and take all the surplus, the best tax function is flat. If the firms have imperfect information, i.e, if they offert incentive contracts, then (under some assumptions) the best redistributive taxation is regressive.

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Publisher Info
Paper provided by University of Venice "Ca' Foscari", Department of Economics in its series Working Papers with number 2006_30.

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Length: 20 pages
Date of creation: 2006
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Handle: RePEc:ven:wpaper:2006_30

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Related research
Keywords: Income Taxation Redistribution Labor market Multi-principals Adverse selection Mechanism design

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

References listed on IDEAS
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  1. Lollivier, Stefan & Rochet, Jean-Charles, 1983. "Bunching and second-order conditions: A note on optimal tax theory," Journal of Economic Theory, Elsevier, vol. 31(2), pages 392-400, December. [Downloadable!] (restricted)
  2. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Blackwell Publishing, vol. 38(114), pages 175-208, April. [Downloadable!] (restricted)
  3. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March. [Downloadable!] (restricted)
    Other versions:
  4. Weymark, John A, 1987. "Comparative Static Properties of Optimal Nonlinear Income Taxes," Econometrica, Econometric Society, vol. 55(5), pages 1165-85, September. [Downloadable!] (restricted)
  5. Boadway, Robin & Cuff, Katherine & Marchand, Maurice, 2000. " Optimal Income Taxation with Quasi-linear Preferences Revisited," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 2(4), pages 435-60. [Downloadable!] (restricted)
    Other versions:
  6. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March. [Downloadable!] (restricted)
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  1. Mathias, HUNGERBUEHLER, 2004. "The impact of Union Power on the Optimal Income Tax Schedule," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2004034, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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