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Taxation and Tournaments

  • Persson, Mats

    ()

    (Institute for International Economic Studies, Stockholm University)

  • Sandmo, Agnar

    ()

    (Norwegian School of Economics and Business Administration)

This paper analyzes the effects of progressive taxes on labour supply and income distribution in the context of the rank-order tournament model originally developed by Lazear and Rosen (1981). We show conditions under which a more progressive tax schedule will cause so large general equilibrium effects that the inequality in disposable income will actually increase. We also show that a non-zero redistributive tax is always optimal if society’s welfare function displays inequality aversion; this result always holds, regardless of behavioral responses and general equilibrium effects.

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Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 715.

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Length: 23 pages
Date of creation: 24 May 2002
Date of revision:
Handle: RePEc:hhs:iiessp:0715
Contact details of provider: Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Phone: +46-8-162000
Fax: +46-8-161443
Web page: http://www.iies.su.se/

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  1. John Hassler & José V. Rodriguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2002. "A Positive Theory of Geographic Mobility and Social Insurance," CESifo Working Paper Series 791, CESifo Group Munich.
  2. Hassler, John & Mora, Jose & Storesletten, Kjetil & Zilibotti, Fabrizio, 2002. "The Survival of the Welfare State," Seminar Papers 704, Stockholm University, Institute for International Economic Studies.
  3. Calvó-Armengol, Antoni & Zenou, Yves, 2001. "Job Matching, Social Network and Word-of-Mouth Communication," Seminar Papers 695, Stockholm University, Institute for International Economic Studies.
  4. Lindbeck, Assar & Nyberg, Sten, 2001. "Raising Children To Work Hard: Altruism, Work Norms And Social Insurance," Seminar Papers 691, Stockholm University, Institute for International Economic Studies.
  5. Storesletten, Kjetil & Telmer, Christopher I. & Yaron, Amir, 2004. "Consumption and risk sharing over the life cycle," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 609-633, April.
  6. Kjetil Storesletten & Chris Telmer & Amir Yaron, . "Asset pricing with idiosyncratic risk and overlapping generations," GSIA Working Papers 226, Carnegie Mellon University, Tepper School of Business.
  7. Lars E.O. Svensson & Michael Woodford, 2000. "Indicator Variables for Optimal Policy," NBER Working Papers 7953, National Bureau of Economic Research, Inc.
  8. Lars Calmfors & Anders Forslund & Maria Hemström, 2002. "Does Active Labour Market Policy Work? Lessons from the Swedish Experiences," CESifo Working Paper Series 675, CESifo Group Munich.
  9. Lindbeck, Assar & Persson, Mats, 2002. "The Gains from Pension Reform," Seminar Papers 712, Stockholm University, Institute for International Economic Studies.
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