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Tax implementability of fair allocations

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  • Yukihiro Nishimura

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Abstract

This paper examines the tax implementability of allocations based on fairness as no-envy (or envy-freeness) and its alternatives, by a tax schedule that depends on labor supply and gross income ((y,l)-implementability). A relevant incentive constraint is perishability of abilities, where agents can exert a lower ability level than they actually possess. We first show that in any economy, every envy-free allocation is (y,l)-implementable. On the other hand, whereas we already know that no-envy may be incompatible with first-best Pareto efficiency, the alternative equity concepts which circumvent this first-best equity-efficiency trade-off meet the obstacle of tax implementability even when labor supply is observable. We also clarify necessary and sufficient domain restrictions under which the egalitarian equivalent allocations satisfy the (y,l)-implementability condition. Copyright Springer-Verlag Berlin/Heidelberg 2004

Suggested Citation

  • Yukihiro Nishimura, 2004. "Tax implementability of fair allocations," Review of Economic Design, Springer;Society for Economic Design, vol. 9(1), pages 31-41, December.
  • Handle: RePEc:spr:reecde:v:9:y:2004:i:1:p:31-41
    DOI: 10.1007/s10058-004-0118-2
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    File URL: http://hdl.handle.net/10.1007/s10058-004-0118-2
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    Cited by:

    1. Ngo Van Long & Frank Stähler, 2012. "Should the Good and the Selfish be Taxed Differently?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(3), pages 932-948, September.

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