When Kolm Meets Mirrless: ELIE
This article discusses the properties of Kolm’s ELIE proposal in the Context of optimal income taxation “à la Mirrlees”. It first shows that ELIE gives rise to non-standard type-dependent budget sets, which has important implications in terms of a minimum labour requirement. Second, it adopts the Mirrleesian framework to characterize ELIE as a first-best tax scheme and casts light on the very specific shape of the distribution of social weights that generate it. Third, it shows that ELIE is incentive compatible only when both gross income and time worked are verifiable, which seems to be a strong assumption for a non-negligible number of taxpayers.
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- 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.
- Mirrlees, James A., 1996.
"Information and Incentives: The Economics of Carrots and Sticks,"
Nobel Prize in Economics documents
1996-1, Nobel Prize Committee.
- Mirrlees, James A, 1997. "Information and Incentives: The Economics of Carrots and Sticks," Economic Journal, Royal Economic Society, vol. 107(444), pages 1311-29, September.
- Dasgupta, Partha & Hammond, Peter, 1980. "Fully progressive taxation," Journal of Public Economics, Elsevier, vol. 13(2), pages 141-154, April.
- Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484.
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