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Redistributive Taxation and Social Insurance

Author

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  • CREMER, Helmuth

    (GREMAQ and IDEI, Université de Toulouse)

  • PESTIEAU, Pierre

    () (CREPP, Université de Liège, CORE, Université catholique de Louvain and Université Paris X)

Abstract

This paper studies the role of social insurance as a redistributive mechanism in presence of an optimal (linear or general) income tax. It considers a second-best setting with two unobservable individual characteristics: ability, measured by the wage rate and risk, measured by the probability of incurring a loss. It shows that both tax progressivity and the optimal level of social insurance crucially depend on the correlation between ability and risk.

Suggested Citation

  • CREMER, Helmuth & PESTIEAU, Pierre, 1995. "Redistributive Taxation and Social Insurance," CORE Discussion Papers 1995054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:1995054
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-1995.html
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    References listed on IDEAS

    as
    1. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
    2. Guesnerie, Roger & Roberts, Kevin, 1984. "Effective Policy Tools and Quantity Controls," Econometrica, Econometric Society, vol. 52(1), pages 59-86, January.
    3. Cremer, Helmuth & Gahvari, Firouz, 1995. "Uncertainty, Optimal Taxation and the Direct versus Indirect Tax Controversy," Economic Journal, Royal Economic Society, vol. 105(432), pages 1165-1179, September.
    4. Boadway, Robin & Marchand, Maurice, 1995. "The Use of Public Expenditures for Redistributive Purposes," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 45-59, January.
    5. Diamond, P. A. & Helms, L. J. & Mirrlees, J. A., 1980. "Optimal taxation in a stochastic economy : A Cobb-Douglas example," Journal of Public Economics, Elsevier, vol. 14(1), pages 1-29, August.
    6. Boadway, Robin & Keen, Michael, 1993. "Public Goods, Self-Selection and Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 463-478, August.
    7. Cremer, Helmuth & Gahvari, Firouz, 1995. "Uncertainty and optimal taxation: In defense of commodity taxes," Journal of Public Economics, Elsevier, vol. 56(2), pages 291-310, February.
    8. Jonathan Eaton & Harvey S. Rosen, 1980. "Optimal Redistributive Taxation and Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 95(2), pages 357-364.
    9. Cremer, Helmuth & Gahvari, Firouz, 1997. "In-kind transfers, self-selection and optimal tax policy," European Economic Review, Elsevier, vol. 41(1), pages 97-114, January.
    10. Blomqvist, Ake & Horn, Henrik, 1984. "Public health insurance and optimal income taxation," Journal of Public Economics, Elsevier, vol. 24(3), pages 353-371, August.
    11. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
    12. Mirrlees, J A, 1990. "Taxing Uncertain Incomes," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 34-45, January.
    13. Boadway, R. & Marchand, M., 1990. "The use of public expenditures for distributive purposes," CORE Discussion Papers 1990066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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