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Fiscal rules of income transformation

Author

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  • Isabel H. Correia

    (Universidade Catolica Portuguesa and Banco de Portugal DEE, Rua Francisco Ribeiro, 1100 Lisboa, PORTUGAL)

Abstract

The purpose of this paper is to characterize the class of fiscal rules of income transformation which are equity improving and, at the same time, preserve the ranking of existing distributions. Contrary to the related literature individual well-being depends not just on income but also on prices. We show that, when the environment is restricted such that a general transformation class still can be defined, the only "desirable" fiscal rule is the simple redistributive linear taxation schedule, of the same type that is the rule in practice in most economies.

Suggested Citation

  • Isabel H. Correia, 1999. "Fiscal rules of income transformation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 13(1), pages 199-205.
  • Handle: RePEc:spr:joecth:v:13:y:1999:i:1:p:199-205 Note: Received: May 8, 1997; revised version: September 15, 1997
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    References listed on IDEAS

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    1. John K.-H. Quah, 2004. "Comparative Statics with Concave and Supermodular Functions," Economics Papers 2004-W01, Economics Group, Nuffield College, University of Oxford.
    2. Masahiko Aoki, 2013. "The Evolution of Organizational Conventions and Gains from Diversity," Chapters,in: Comparative Institutional Analysis, chapter 6, pages 59-71 Edward Elgar Publishing.
    3. Marco LiCalzi & Arthur F. Veinott, 2005. "Subextremal functions and lattice programming," GE, Growth, Math methods 0509001, EconWPA.
    4. Milgrom, Paul & Roberts, John, 1996. "The LeChatelier Principle," American Economic Review, American Economic Association, pages 173-179.
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    Cited by:

    1. Isabel Correia, 2010. "Consumption Taxes and Redistribution," American Economic Review, American Economic Association, pages 1673-1694.
    2. Isabel Horta Correia, 2005. "Consumption Taxes and Redistribution," Working Papers w200511, Banco de Portugal, Economics and Research Department.
    3. Isabel Correia, 2010. "Consumption Taxes and Redistribution," American Economic Review, American Economic Association, pages 1673-1694.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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