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Optimal income taxation and the shape of average tax rates



    () (Université Catholique de Louvain - Department of Economics)

  • Etienne LEHMANN

    () (ERMES - Université Paris 2, Université Catholique de Louvain - Department of Economics and IZA)


    () (Université Catholique de Louvain - Department of Economics and CORE)


We investigate whether the optimal income tax model of Mirrlees (1971) can reproduce the empirically observed increasing average tax rates. We give a necessary condition and exhibit two examples where the optimal average tax rates are increasing.

Suggested Citation

  • Alexis PARMENTIER & Etienne LEHMANN & Jean HINDRIKS, 2006. "Optimal income taxation and the shape of average tax rates," Economics Bulletin, AccessEcon, vol. 8(2), pages 1-6.
  • Handle: RePEc:ebl:ecbull:eb-06h20002

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    References listed on IDEAS

    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.
    2. Immervoll, Herwig, 2004. "Average and marginal effective tax rates facing workers in the EU: a micro-level analysis of levels, distributions and driving factors (revised version of EM2/02)," EUROMOD Working Papers EM6/04, EUROMOD at the Institute for Social and Economic Research.
    3. Jesus Seade, 1982. "On the Sign of the Optimum Marginal Income Tax," Review of Economic Studies, Oxford University Press, vol. 49(4), pages 637-643.
    4. Diamond, Peter A, 1998. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates," American Economic Review, American Economic Association, vol. 88(1), pages 83-95, March.
    5. Emmanuel Saez, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Oxford University Press, vol. 68(1), pages 205-229.
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    Cited by:

    1. Boadway, Robin & Jacquet, Laurence, 2008. "Optimal marginal and average income taxation under maximin," Journal of Economic Theory, Elsevier, vol. 143(1), pages 425-441, November.
    2. Soumyanetra Munshi, 2011. "On existence of pure strategy equilibrium with endogenous income," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 37(1), pages 1-37, June.
    3. Lehmann, Etienne & Parmentier, Alexis & Van Der Linden, Bruno, 2011. "Optimal income taxation with endogenous participation and search unemployment," Journal of Public Economics, Elsevier, vol. 95(11), pages 1523-1537.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue


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