The Efficient Side of Progressive Income Taxation
This paper examines the allocative implications of progressive income taxation when individuals care about their relative income. It shows that tax progressivity might improve efficiency, and the more so in egalitarian economies. Introducing a progressive income tax can yield a Pareto improvement if pre-tax income is evenly distributed. Implementing undistorted choices of working hours requires a progressive tax schedule, and the optimal degree of progressivity decreases with pre-tax income inequality.
|Date of creation:||2000|
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- Neumark, David & Postlewaite, Andrew, 1998.
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Journal of Public Economics,
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- Oswald, Andrew J., 1983. "Altruism, jealousy and the theory of optimal non-linear taxation," Journal of Public Economics, Elsevier, vol. 20(1), pages 77-87, February.
- Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
- Jakobsson, Ulf, 1976. "On the measurement of the degree of progression," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 161-168. Full references (including those not matched with items on IDEAS)
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