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When Redistribution Leads to Regressive Taxation

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  • CYRIL HARITON
  • GWENAËL PIASER

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 firms have imperfect information, i.e., if they offer incentive contracts, then (under some assumptions) the best redistributive taxation is regressive. Copyright 2007 Blackwell Publishing, Inc..

Suggested Citation

  • Cyril Hariton & Gwenaël Piaser, 2007. "When Redistribution Leads to Regressive Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(4), pages 589-606, August.
  • Handle: RePEc:bla:jpbect:v:9:y:2007:i:4:p:589-606
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    References listed on IDEAS

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    1. 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 435-460.
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    Cited by:

    1. Mathias, HUNGERBUEHLER, 2004. "The impact of Union Power on the Optimal Income Tax Schedule," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2004034, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • 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

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