IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Competitive Nonlinear Taxation and Constitutional Choice

  • Massimo Morelli
  • Huanxing Yang
  • Lixin Ye

In an economy where agents are characterized by different productivities (vertical types) and different abilities to move (horizontal types), we compare a unified nonlinear optimal taxation schedule with the equilibrium taxation schedule that would be chosen by two competing tax authorities if the same economy were divided into two States. The overall level of progressivity and redistribution is unambiguously lower under competitive taxation than under unified taxation; the “rich” are always in favor of competing authorities and local governments, whereas the “poor” are always in favor of unified taxation. The constitutional choice between fiscal regimes depends on the preferences of the middle class, which in turn depend on the initial conditions in terms of the distribution of abilities (incomes), the relative power of the various classes, and mobility costs. In particular, as mobility increases, it becomes increasingly likely that a reform in the direction of unification of fiscal policies in a federation will receive majority support, while a decreased average wealth can have the opposite effect.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://cadmus.eui.eu/dspace/bitstream/1814/13666/1/ECO_2010_14.pdf
File Function: main text
Download Restriction: no

Paper provided by European University Institute in its series Economics Working Papers with number ECO2010/14.

as
in new window

Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:eui:euiwps:eco2010/14
Contact details of provider: Postal: Badia Fiesolana, Via dei Roccettini, 9, 50014 San Domenico di Fiesole (FI) Italy
Phone: +39-055-4685.982
Fax: +39-055-4685.902
Web page: http://www.eui.eu/ECO/
More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  2. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  3. Huber, Bernd, 1999. "Tax competition and tax coordination in an optimum income tax model," Munich Reprints in Economics 19402, University of Munich, Department of Economics.
  4. Robin Boadway & Katherine Cuff & Maurice Marchand, 1999. "Optimal Income Taxation With Quasi-Linear Preferences Revisited," Working Papers 984, Queen's University, Department of Economics.
  5. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
  6. Frank H. Page & Paulo Klinger Monteiro, 2002. "Three principles of competitive nonlinear pricing," Game Theory and Information 0204001, EconWPA.
  7. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
  8. Wilson, John D., 1980. "The effect of potential emigration on the optimal linear income tax," Journal of Public Economics, Elsevier, vol. 14(3), pages 339-353, December.
  9. Salanié, Bernard, 2011. "The Economics of Taxation," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262016346, June.
  10. Guesnerie, Roger & Seade, Jesus, 1982. "Nonlinear pricing in a finite economy," Journal of Public Economics, Elsevier, vol. 17(2), pages 157-179, March.
  11. Frank Stähler, 2002. "Budget Cuts, Social Assistance and Voluntary Unemployment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(4), pages 573-579, October.
  12. Salvador Barbera & Matthew O. Jackson, 2004. "Choosing How to Choose: Self-Stable Majority Rules and Constitutions," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 1011-1048, August.
  13. Jean-Charles Rochet & Lars A. Stole, 2002. "Nonlinear Pricing with Random Participation," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 277-311.
  14. Mirrlees, J. A., 1982. "Migration and optimal income taxes," Journal of Public Economics, Elsevier, vol. 18(3), pages 319-341, August.
  15. Saez, Emmanuel, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 205-29, January.
  16. repec:van:wpaper:0812 is not listed on IDEAS
  17. Myers, G.M. & Mansoorian, A., 1995. "On the Consequences of Government Objectives for Economies with Mobile Populations," Papers 95-2, York (Canada) - Department of Economics.
  18. Larry Epstein & Michael Peters, 1996. "A Revelation Principle For Competing Mechanisms," Working Papers peters-96-02, University of Toronto, Department of Economics.
  19. Petter Osmundsen, 1999. "Taxing Internationally Mobile Individuals—A Case of Countervailing Incentives," International Tax and Public Finance, Springer, vol. 6(2), pages 149-164, May.
  20. David Martimort & Lars Stole, 2001. "The Revelation and Delegation Principles in Common Agency Games," CESifo Working Paper Series 575, CESifo Group Munich.
  21. Mansoorian, Arman & Myers, Gordon M., 1993. "Attachment to home and efficient purchases of population in a fiscal externality economy," Journal of Public Economics, Elsevier, vol. 52(1), pages 117-132, August.
  22. Alan Krause, 2009. "Education and Taxation Policies in the Presence of Countervailing Incentives," Economica, London School of Economics and Political Science, vol. 76(302), pages 387-399, 04.
  23. Leite-Monteiro, Manuel, 1997. "Redistributive policy with labour mobility across countries," Journal of Public Economics, Elsevier, vol. 65(2), pages 229-244, August.
  24. Rochet, Jean-Charles, 1987. "A necessary and sufficient condition for rationalizability in a quasi-linear context," Journal of Mathematical Economics, Elsevier, vol. 16(2), pages 191-200, April.
  25. Weymark, John A., 1986. "A reduced-form optimal nonlinear income tax problem," Journal of Public Economics, Elsevier, vol. 30(2), pages 199-217, July.
  26. Alain Trannoy, Laurent Simula and, 2009. "Optimal Income Tax under the Threat of Migration by Top-Income Earners," Working Paper Series, Center for Fiscal Studies 2009:8, Uppsala University, Department of Economics.
  27. Huber, Bernd, 1999. "Tax competition and tax coordination in an optimum income tax model," Journal of Public Economics, Elsevier, vol. 71(3), pages 441-458, March.
  28. Lollivier, Stefan & Rochet, Jean-Charles, 1983. "Bunching and second-order conditions: A note on optimal tax theory," Journal of Economic Theory, Elsevier, vol. 31(2), pages 392-400, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eui:euiwps:eco2010/14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rhoda Lane)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.