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The Impact of Changing Skill Levels on Optimal Nonlinear Income Taxes

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Listed:
  • Craig Brett

    (Mount Allison University)

  • John Weymark

    (Department of Economics, Vanderbilt University)

Abstract

The impact of changing an individual's skill level on the solution to a finite population version of the Mirrlees optimal nonlinear income tax problem with quasilinear-in-leisure preferences is investigated. It is shown that it is possible to sign the directions of change in everyone's optimal consumptions and optimal marginal tax rates in response to such a change.

Suggested Citation

  • Craig Brett & John Weymark, 2007. "The Impact of Changing Skill Levels on Optimal Nonlinear Income Taxes," Vanderbilt University Department of Economics Working Papers 0708, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:0708
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    File URL: http://www.accessecon.com/pubs/VUECON/vu07-w08R.pdf
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    References listed on IDEAS

    as
    1. Lollivier, Stefan & Rochet, Jean-Charles, 1983. "Bunching and second-order conditions: A note on optimal tax theory," Journal of Economic Theory, Elsevier, vol. 31(2), pages 392-400, December.
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    6. Guesnerie, Roger & Seade, Jesus, 1982. "Nonlinear pricing in a finite economy," Journal of Public Economics, Elsevier, vol. 17(2), pages 157-179, March.
    7. Weymark, John A., 1986. "A reduced-form optimal nonlinear income tax problem," Journal of Public Economics, Elsevier, vol. 30(2), pages 199-217, July.
    8. Jonathan Hamilton & Pierre Pestieau, 2005. "Optimal Income Taxation and the Ability Distribution: Implications for Migration Equilibria," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(1), pages 29-45, January.
    9. repec:adr:anecst:y:2006:i:83-84:p:05 is not listed on IDEAS
    10. Laurent Simula, 2007. "Optimality conditions and comparative static properties of non-linear income taxes revisited," Working Papers halshs-00588074, HAL.
    11. Craig Brett & John A. Weymark, 2008. "Public Good Provision And The Comparative Statics Of Optimal Nonlinear Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 255-290, February.
    12. Weymark, John A, 1987. "Comparative Static Properties of Optimal Nonlinear Income Taxes," Econometrica, Econometric Society, vol. 55(5), pages 1165-1185, September.
    13. Diamond, Peter A, 1998. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates," American Economic Review, American Economic Association, vol. 88(1), pages 83-95, March.
    14. 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. Helmuth Cremer & Pierre Pestieau & Maria Racionero, 2011. "Unequal wages for equal utilities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(4), pages 383-398, August.
    2. Craig Brett, 2012. "The effects of population aging on optimal redistributive taxes in an overlapping generations model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(6), pages 777-799, December.
    3. Philippe Bontems & Estelle Gozlan, 2018. "Trade, environment, and income inequality: An optimal taxation approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(4), pages 557-581, August.
    4. Eric Stephens, 2012. "Teach a man to fish? Education vs. optimal taxation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1700-1727, November.
    5. Brett, Craig & Weymark, John A., 2011. "How optimal nonlinear income taxes change when the distribution of the population changes," Journal of Public Economics, Elsevier, vol. 95(11), pages 1239-1247.
    6. Helmuth Cremer & Philippe Donder & Pierre Pestieau, 2010. "Education and social mobility," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(4), pages 357-377, August.
    7. Simula, Laurent & Trannoy, Alain, 2010. "Optimal income tax under the threat of migration by top-income earners," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 163-173, February.
    8. Laurent Simula, 2010. "Optimal nonlinear income tax and nonlinear pricing: optimality conditions and comparative static properties," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 35(2), pages 199-220, July.
    9. Craig Brett & John A. Weymark, 2009. "Comparative Statics of Optimal Nonlinear Income Taxation in the Presence of a Publicly Provided Input," Vanderbilt University Department of Economics Working Papers 0910, Vanderbilt University Department of Economics.
    10. Rothschild, Casey, 2019. "Screening with convex menus and optimal flow taxation," Journal of Public Economics, Elsevier, vol. 178(C).
    11. Laurent Simula & Alain Trannoy, 2023. "Bunching in rank-dependent optimal income tax schedules," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 60(1), pages 237-263, January.
    12. Li, Jinlu & Lin, Shuanglin, 2016. "Optimal income taxation with discrete skill distribution," Mathematical Social Sciences, Elsevier, vol. 83(C), pages 58-70.
    13. Jang-Ting Guo & Alan Krause, 2018. "Changing social preferences and optimal redistributive taxation," Oxford Economic Papers, Oxford University Press, vol. 70(1), pages 73-92.
    14. Alan Krause, 2008. "Optimal Nonlinear Income Taxation with Learning-by-Doing," Discussion Papers 08/08, Department of Economics, University of York.
    15. Alan Krause, 2017. "On redistributive taxation under the threat of high-skill emigration," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 48(4), pages 845-856, April.
    16. Laurent Simula & Alain Trannoy, 2020. "Bunching and Rank-Dependent Optimal Income Taxation," CESifo Working Paper Series 8443, CESifo.
    17. Juin‐Jen Chang & Hsueh‐Fang Tsai & Tsung‐Sheng Tsai, 2019. "Optimal Dynamic Taxation with Distinctive Forms of Social Status Attainment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(2), pages 808-842, April.
    18. Sebastian G. Kessing & Benny Schneider, 2014. "Regional Investment and Individual Redistribution in a Federation," Volkswirtschaftliche Diskussionsbeiträge 168-14, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    19. Krause, Alan, 2009. "Optimal nonlinear income taxation with learning-by-doing," Journal of Public Economics, Elsevier, vol. 93(9-10), pages 1098-1110, October.

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    More about this item

    Keywords

    Optimal income taxation; comparative statics;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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