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Optimal redistribution with unobservable disability: welfarist versus non-welfarist social objectives

  • PESTIEAU, Pierre

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

  • RACIONERO, Maria

This paper examines the optimal non linear income and commodity tax when the same labor disutility can receive two alternative interpretations, taste for leisure and disability, but the disability is not readily observable. We compare the optimal policyunder alternative social objectives, welfarist and non-welfarist, and conclude that the non-welfarist objective, in which the planner gives a higher weight to the disutility of labour of the disabled individuals, is the only reasonable specification. It has some foundation in the theory of responsability; further, unlike the other specifications it yields an optimal solution that may involve a lower labour supply requirement from disabled individuals.

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File URL: http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2007_35.pdf
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2007035.

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Date of creation: 01 May 2007
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Handle: RePEc:cor:louvco:2007035
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  1. Marc Fleurbaey & Fran�ois Maniquet, 2006. "Fair Income Tax," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 55-83.
  2. FLEURBAEY, Marc & MANIQUET, François, . "Help the low skilled or let the hardworking thrive? A study of fairness in optimal income taxation," CORE Discussion Papers RP -1970, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2004. "Disability Testing and Retirement," IDEI Working Papers 281, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Ravi Kanbur & Jukka Pirttilä & Matti Tuomala, 2004. "Non-Welfarist Optimal Taxation and Behavioral Public Economics," CESifo Working Paper Series 1291, CESifo Group Munich.
  5. Dirk Van de gaer & Marc Fleurbaey & Walter Bossert, 1999. "Responsibility, talent, and compensation: A second-best analysis," Review of Economic Design, Springer, vol. 4(1), pages 35-55.
  6. Schokkaert, Erik & Van de gaer, Dirk & Vandenbroucke, Frank & Luttens, Roland Iwan, 2004. "Responsibility sensitive egalitarianism and optimal linear income taxation," Mathematical Social Sciences, Elsevier, vol. 48(2), pages 151-182, September.
  7. Maurice Marchand & Pierre Pestieau & María Racionero, 2003. "Optimal redistribution when different workers are indistinguishable," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 911-922, November.
  8. Fleurbaey, Marc, 1995. "Equality and responsibility," European Economic Review, Elsevier, vol. 39(3-4), pages 683-689, April.
  9. Ted O'Donoghue & Matthew Rabin, 2003. "Studying Optimal Paternalism, Illustrated by a Model of Sin Taxes," American Economic Review, American Economic Association, vol. 93(2), pages 186-191, May.
  10. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
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