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Optimal Tax-Transfer-Schemes under Partial Information

  • Homburg, Stefan
  • Lohse, Tim

According to a widely held belief, all who are able to work, should work . We consider this statement within a framework of non-linear taxation. The crucial differ-ence between our model and the standard model is that the government can distinguish between productive persons and the disabled. A general proposition regarding the design of tax-transfer-schemes under such partial information is derived. Moreover, it is shown that unemployment on the side of the productive poor may still be optimal.

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Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-298.

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Length: 9 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:han:dpaper:dp-298
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  1. Diamond, P., 1980. "Income taxation with fixed hours of work," Journal of Public Economics, Elsevier, vol. 13(1), pages 101-110, February.
  2. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1039-1073, August.
  3. Homburg, Stefan, 2002. "The Optimal Income Tax: Restatement and Extensions," Hannover Economic Papers (HEP) dp-252, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  4. Besley, T. & Coate, S., 1991. "The Design Of Income Maintenance Programs," Papers 74, Princeton, Woodrow Wilson School - John M. Olin Program.
  5. Ritva Immonen & Ravi Kanbur & Michael Keen & Matti Tuomala, 1994. "Tagging and taxing: the optimal use of categorical and income information in designing tax/transfer schemes," IFS Working Papers W94/05, Institute for Fiscal Studies.
  6. Homburg, Stefan, 2002. "Optimal Marginal Tax Rates for Low Incomes: Positive, Negative, or Zero?," Hannover Economic Papers (HEP) dp-255, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  7. Katherine Cuff, 1998. "Optimality of Workfare with Heterogeneous Preferences," Working Papers 968, Queen's University, Department of Economics.
  8. Immonen, Ritva, et al, 1998. "Tagging and Taxing: The Optimal Use of Categorical and Income Information in Designing Tax/Transfer Schemes," Economica, London School of Economics and Political Science, vol. 65(258), pages 179-92, May.
  9. Chambers, Robert G., 1989. "Workfare or welfare?," Journal of Public Economics, Elsevier, vol. 40(1), pages 79-97, October.
  10. Homburg, Stefan, 1998. "An Axiomatic Proof of Mirrlees' Formula," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 285-295.
  11. Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
  12. Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059.
  13. Homburg, Stefan, 2010. "Allgemeine Steuerlehre," EconStor Books, ZBW - German National Library of Economics, number 92547, November.
  14. Boadway, Robin & Marceau, Nicolas & Sato, Motohiro, 1999. "Agency and the design of welfare systems," Journal of Public Economics, Elsevier, vol. 73(1), pages 1-30, July.
  15. 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.
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