Health, fairness and taxation
We consider a model where agents differ in their preferences about consumption labor and health, in their (health-dependent) earning ability, and in their health disposition. We study the joint taxation of income and health expenditure, under incentive-compatibility constraints, on the basis of efficiency and fairness principles. The fairness principles we consider propose, on one side, to reduce inequalities deriving from factors that do not depend on individuals' responsibility. On the other side, redistribution should be precluded at least when all agents in the economy have equal physical characteristics. We construct, on the basis of such principles, a particular social welfare function. Then we give the explicit formula for the comparison of tax policies: we prove that a tax reform should always benefit agents with the worst earning ability and the worst health disposition first. Finally, at the bottom of the income distribution the optimal tax scheme should exhibit non-uniform tax rates over health expenditure and non-positive average marginal tax rates over income.
|Date of creation:||09 May 2012|
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"Fairness, Responsibility, and Welfare,"
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"Arrovian aggregation in economic environments: how much should we know about indifference surfaces?,"
Journal of Economic Theory,
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"Negative marginal tax rates and heterogeneity,"
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W09/12, Institute for Fiscal Studies.
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"Optimal redistribution with heterogeneous preferences for leisure,"
CORE Discussion Papers
2001025, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Robin Boadway & Maurice Marchand & Pierre Pestieau & María del Mar Racionero, 2002. "Optimal Redistribution with Heterogeneous Preferences for Leisure," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(4), pages 475-498, October.
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