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When Kolm Meets Mirrless: ELIE

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Abstract

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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  • Alain Trannoy & Laurent Simula, 2008. "When Kolm Meets Mirrless: ELIE," IDEP Working Papers 0811, Institut d'economie publique (IDEP), Marseille, France, revised Aug 2008.
    • Handle: RePEc:iep:wpidep:0811
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    File URL: http://www.idep-fr.org/spip.php?article348
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    References listed on IDEAS

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    1. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484, December.
    2. Dasgupta, Partha & Hammond, Peter, 1980. "Fully progressive taxation," Journal of Public Economics, Elsevier, vol. 13(2), pages 141-154, April.
    3. Mirrlees, James A, 1997. "Information and Incentives: The Economics of Carrots and Sticks," Economic Journal, Royal Economic Society, vol. 107(444), pages 1311-1329, September.
    4. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
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    Cited by:

    1. Laurent Simula & Alain Trannoy, 2008. "An Exploration of Incentive-Compatible ELIE," IDEP Working Papers 0812, Institut d'economie publique (IDEP), Marseille, France, revised 14 Dec 2008.
    2. Jean-Sébastien Gharbi & Yves Meinard, 2012. "Sur le sens du non welfarisme dans le modèle ELIE de redistribution des revenus de Kolm," AMSE Working Papers 1237, Aix-Marseille School of Economics, France.

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    More about this item

    Keywords

    ELIE; Income Redistribution; Optimal Taxation; Incentive Compatibility.;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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