Fair Earnings Tax Reforms

Erwin Ooghe, Erik Schokkaert and Hannes Serruys

No 10242, CESifo Working Paper Series from CESifo

Abstract: We characterize a measure of social welfare for linear production economies in which individuals differ in productive skills and preferences. The key feature of our measure is that it aggregates fairness gaps, defined as the difference between the money-metric utility that the individual currently obtains and the money-metric utility that the individual should obtain in a fair society. Social welfare depends on two normative parameters: society’s aversion to unfairness and the degree to which society wants to compensate individuals for productivity differences. The latter parameter makes it possible to accommodate a whole range of ethical perspectives, from libertarianism to resource-egalitarianism. As an illustration, we use our social welfare measure to evaluate four hypothetical earnings tax reforms for Belgian singles. The degree of compensation for productivity differences turns out to be the most important normative choice for the overall evaluation, while allowing for involuntary unemployment is the most important empirical choice.

Keywords: fairness; money-metric utility; excess burden; unfair inequality; earnings tax reforms; involuntary unemployment (search for similar items in EconPapers)
JEL-codes: D30 D60 D70 H20 I30 J20 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-lma, nep-pbe, nep-pub and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp10242.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10242

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().