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Optimal income taxation : An ordinal approach

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  • M. Fleurbaey
  • F. Maniquet

Abstract

In a model where agents have unequal production skills and different preferences, we build social welfare functions which rely only on ordinal non-comparable information on individual preferences. Social welfare functions are required to satisfy properties of compensation for inequalities in skills, and responsibility for preferences. Then, assuming skills and preferences are unobservable, we use these social welfare functions to design optimal income tax schemes. We obtain ethical foundations for, among others, a maximized minimal income, a zero marginal tax rate for low incomes, and increasing marginal tax rates.
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  • M. Fleurbaey & F. Maniquet, 1999. "Optimal income taxation : An ordinal approach," THEMA Working Papers 99-43, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:99-43
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    References listed on IDEAS

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    1. Bossert, W & Fleurbaey, M & Van de gaer, D, 1996. "On Second-Best Compensation," Working Papers 9601, University of Waterloo, Department of Economics.
    2. Fleurbaey, Marc & Maniquet, Francois, 1996. "Fair allocation with unequal production skills: The No Envy approach to compensation," Mathematical Social Sciences, Elsevier, vol. 32(1), pages 71-93, August.
    3. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    4. M. Fleurbaey & F. Maniquet, 2008. "Fair social orderings," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(1), pages 25-45, January.
    5. Kaneko, Mamoru & Nakamura, Kenjiro, 1979. "The Nash Social Welfare Function," Econometrica, Econometric Society, vol. 47(2), pages 423-435, March.
    6. Kevin W. S. Roberts, 1980. "Possibility Theorems with Interpersonally Comparable Welfare Levels," Review of Economic Studies, Oxford University Press, vol. 47(2), pages 409-420.
    7. M. Fleurbaey & F. Maniquet, 2000. "Fair Social Orderings With Unequal Production Skills," THEMA Working Papers 2000-17, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    8. Marc Fleurbaey & Maurice Salles & John Weymark, 2008. "Justice, Political Liberalism and Utilitarianism," Post-Print hal-00246415, HAL.
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    Cited by:

    1. 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.
    2. Cremer Helmuth & Lozachmeur Jean-Marie & Pestieau Pierre, 2007. "Disability Testing and Retirement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-34, February.
    3. John Creedy & Norman Gemmell & Nicolas Hérault & Penny Mok, 2018. "Microsimulation analysis of optimal income tax reforms. An application to New Zealand," Working Papers 468, ECINEQ, Society for the Study of Economic Inequality.
    4. Denis Maguain, 2002. "Les théories de la justice distributive post-rawlsiennes. Une revue de la littérature," Revue Économique, Programme National Persée, vol. 53(2), pages 165-199.
    5. John Creedy & Nicolas Hérault, 2011. "Decomposing Inequality and Social Welfare Changes: The Use of Alternative Welfare Metrics," Melbourne Institute Working Paper Series wp2011n08, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    6. François Maniquet, 2004. "On the equivalence between welfarism and equality of opportunity," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 23(1), pages 127-147, August.
    7. Maria Racionero, 2000. "Optimal Redistribution with Unobservable Preferences for an Observable Merit Good," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(4), pages 479-501, August.
    8. Bart Capéau & Erwin Ooghe, 2001. "Non-welfare economics and the well-being of phantom agents: an appeal to caution," Public Economics Working Paper Series wpphnag, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
    9. Yukihiro Nishimura, 2008. "Envy Minimization In The Optimal Tax Context," Working Paper 1178, Economics Department, Queen's University.

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