The Equity-Efficiency Trade-Off: Breit Reconsidered
A simple labor supply model with Cobb-Douglas preferences, lognormally distributed wage rates, and dual-rate negative income taxation is used to reexamine W. Breit's (1974) illustration of how society's chosen combination of inequality and output can be explained. This explanation is shown to be flawed. There are a number of implications for the design of a dual-rate negative income tax schedule. Copyright 1990 by Royal Economic Society.
Volume (Year): 42 (1990)
Issue (Month): 1 (January)
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