IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-04954501.html
   My bibliography  Save this paper

Generalized Production Efficiency

Author

Listed:
  • Laurence Jacquet

    (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

  • Etienne Lehmann

    (CRED - Centre de Recherche en Economie et Droit - Université Paris-Panthéon-Assas, CEPR - Center for Economic Policy Research, CESifo - CESifo, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics, TEPP - Théorie et évaluation des politiques publiques - CNRS - Centre National de la Recherche Scientifique)

Abstract

When should governments sacrifice production efficiency for redistribution? We generalize the celebrated result of Diamond and Mirrlees (1971a,b) by allowing for imperfect competition, suboptimal and nonlinear taxation. We demonstrate that production efficiency hinges on the flexibility of the tax system in compensating gains and losses from changes in factor prices. This requires the tax system to target each factor's income. We show how to adjust tax systems or production policies for imperfect targeting and market failures, even when the tax system is not flexible enough. We then obtain new sufficient statistics formulas. Endogenous factor prices do not modify the test to identify Pareto-improving tax reforms.

Suggested Citation

  • Laurence Jacquet & Etienne Lehmann, 2025. "Generalized Production Efficiency," Working Papers hal-04954501, HAL.
    • Handle: RePEc:hal:wpaper:hal-04954501
    Note: View the original document on HAL open archive server: https://univ-pantheon-assas.hal.science/hal-04954501v2
    as

    Download full text from publisher

    File URL: https://univ-pantheon-assas.hal.science/hal-04954501v2/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Marie‐Noëlle Lefebvre & Etienne Lehmann & Michaël Sicsic, 2025. "Estimating the Laffer tax rate on capital income: cross‐base responses matter!," Scandinavian Journal of Economics, Wiley Blackwell, vol. 127(2), pages 460-489, April.
    2. Ilyana Kuziemko & Michael I. Norton & Emmanuel Saez & Stefanie Stantcheva, 2015. "How Elastic Are Preferences for Redistribution? Evidence from Randomized Survey Experiments," American Economic Review, American Economic Association, vol. 105(4), pages 1478-1508, April.
    3. Chia-Lin Chang & Stéphane Robin, 2012. "Knowledge sourcing and firm performance in an industrializing economy: the case of Taiwan (1992–2003)," Empirical Economics, Springer, vol. 42(3), pages 947-986, June.
    4. Boadway, Robin, 2012. "From Optimal Tax Theory to Tax Policy: Retrospective and Prospective Views," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262017113, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Emmanuel Saez & Stefanie Stantcheva, 2016. "Generalized Social Marginal Welfare Weights for Optimal Tax Theory," American Economic Review, American Economic Association, vol. 106(1), pages 24-45, January.
    2. Boadway,Robin & Cuff,Katherine, 2022. "Tax Policy," Cambridge Books, Cambridge University Press, number 9781108949453, June.
    3. Ashantha Ranasinghe & Xuejuan Su, 2023. "When social assistance meets market power: A mixed duopoly view of health insurance in the United States," Economic Inquiry, Western Economic Association International, vol. 61(4), pages 851-869, October.
    4. Francesco Capozza & Ingar Haaland & Christopher Roth & Johannes Wohlfart, 2021. "Studying Information Acquisition in the Field: A Practical Guide and Review," CEBI working paper series 21-15, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    5. Collewet, Marion & Fairley, Kim & Kessels, Roselinde & Knoef, Marike & van Vliet, Olaf, 2024. "The design of welfare: unraveling taxpayers' preferences," OSF Preprints 4am7e, Center for Open Science.
    6. Andrea F.M. Martinangeli & Lisa Windsteiger, 2019. "Immigration vs. Poverty: Causal Impact on Demand for Redistribution in a Survey Experiment," Working Papers tax-mpg-rps-2019-13, Max Planck Institute for Tax Law and Public Finance.
    7. Blaufus, Kay & Chirvi, Malte & Huber, Hans-Peter & Maiterth, Ralf & Sureth-Slaone, Caren, 2020. "Tax misperception and its effects on decision making: A literature review," arqus Discussion Papers in Quantitative Tax Research 261, arqus - Arbeitskreis Quantitative Steuerlehre.
    8. Adler, Matthew D. & Ferranna, Maddalena & Hammitt, James K. & Treich, Nicolas, 2021. "Fair innings? The utilitarian and prioritarian value of risk reduction over a whole lifetime," Journal of Health Economics, Elsevier, vol. 75(C).
    9. Rodríguez Chatruc, Marisol & Rozo, Sandra, 2021. "How Does it Feel to Be Part of the Minority?: Impacts of Perspective Taking on Prosocial Behavior," IDB Publications (Working Papers) 11599, Inter-American Development Bank.
    10. Barrera, Oscar & Guriev, Sergei & Henry, Emeric & Zhuravskaya, Ekaterina, 2020. "Facts, alternative facts, and fact checking in times of post-truth politics," Journal of Public Economics, Elsevier, vol. 182(C).
    11. Cattaneo, Maria & Lergetporer, Philipp & Schwerdt, Guido & Werner, Katharina & Woessmann, Ludger & Wolter, Stefan C., 2020. "Information provision and preferences for education spending: Evidence from representative survey experiments in three countries," European Journal of Political Economy, Elsevier, vol. 63(C).
    12. Ingar Haaland & Christopher Roth & Johannes Wohlfart, 2023. "Designing Information Provision Experiments," Journal of Economic Literature, American Economic Association, vol. 61(1), pages 3-40, March.
    13. Cattaneo, Cristina & Grieco, Daniela, 2021. "Turning opposition into support to immigration: The role of narratives," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 785-801.
    14. Maitreesh Ghatak & François Maniquet, 2019. "Universal Basic Income: Some Theoretical Aspects," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 895-928, August.
    15. Chen Lian & Yueran Ma & Carmen Wang, 2019. "Low Interest Rates and Risk-Taking: Evidence from Individual Investment Decisions," The Review of Financial Studies, Society for Financial Studies, vol. 32(6), pages 2107-2148.
    16. Guenther, Isabel & Tetteh-Baah, Samuel Kofi, 2019. "The impact of discrimination on redistributive preferences and productivity: experimental evidence from the United States," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203652, Verein für Socialpolitik / German Economic Association.
    17. Cars Hommes & Julien Pinter & Isabelle Salle, 2023. "What People Believe about Monetary Finance and What We Can(‘t) Do about It: Evidence from a Large-Scale, Multi-Country Survey Experiment," CESifo Working Paper Series 10574, CESifo.
    18. Marc A. Ragin & Benjamin L. Collier & Johannes G. Jaspersen, 2021. "The effect of information disclosure on demand for high‐load insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(1), pages 161-193, March.
    19. Dieter Schmidtchen & Jenny Helstroffer & Christian Koboldt, 2021. "Regulatory failure and the polluter pays principle: why regulatory impact assessment dominates the polluter pays principle," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 23(1), pages 109-144, January.
    20. Lasse J. Jessen & Sebastian Koehne & Patrick Nüß & Jens Ruhose, 2024. "Socioeconomic Inequality in Life Expectancy: Perception and Policy Demand," CESifo Working Paper Series 10940, CESifo.

    More about this item

    Keywords

    Production efficiency; Nonlinear income taxation; Several income sources;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-04954501. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.