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An Axiomatic Proof of Mirrlees' Formula

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  • Homburg, Stefan

Abstract

Mirrlees' optimal income tax formula has never been proven rigorously, and it is hard to understand it in economic terms. We prove an analogous formula for an economy with finitely many persons. This is easy and allows a simple economic interpretation. Thereafter, Mirrlees' original formula is derived by means of a limit theorem. The analysis also clarifies the discussion between Revesz and Saez published as "Communications" below in this issue of PF/FP. It shows which formula is correct and how the methodological problems, in particular the circularity problem, can be dealt with.

Suggested Citation

  • Homburg, Stefan, 1998. "An Axiomatic Proof of Mirrlees' Formula," Public Finance = Finances publiques, , vol. 53(3-4), pages 285-295.
  • Handle: RePEc:pfi:pubfin:v:53:y:1998:i:3-4:p:285-95
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    References listed on IDEAS

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    1. 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.
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    Cited by:

    1. Homburg Stefan & Lohse Tim, 2005. "Optimal Taxes and Transfers under Partial Information," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(6), pages 622-629, December.
    2. Homburg, Stefan, 2010. "Allgemeine Steuerlehre," EconStor Books, ZBW - German National Library of Economics, number 92547, August.
    3. Tim Lohse & Peter Lutz & Christian Thomann, 2013. "Redistributional consequences of early childhood intervention," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(3), pages 373-381, June.
    4. Lohse Tim, 2014. "The Objections against Workfare Revised," Review of Economics, De Gruyter, vol. 65(1), pages 95-118, April.
    5. Revesz, John T, 1998. "Some Comments on the Reply by Saez and the Article by Homburg [Comparing Elasticities-Based Optimal Income Tax Formulas] [An Axiomatic Proof of Mirrlees' Formula]," Public Finance = Finances publiques, , vol. 53(3-4), pages 486-488.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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