Optimal Income Taxation when Skills and Behavioral Elasticities are Heterogeneous

Laurence Jacquet and Etienne Lehmann ()

No 5265, CESifo Working Paper Series from CESifo

Abstract: We solve a large class of multidimensional adverse selection problems with one observed action, to derive the nonlinear optimal income tax schedule when individuals differ along multiple unobserved characteristics. Based on a perturbation of the optimal allocation, our method allows individuals to have e.g. different skills and different taxable income elasticities. Our optimal tax formula generalizes the one with only one-dimensional source of heterogeneity and is numerically implementable. We find that, compared to the case where individuals differ only in skills, allowing them to also have heterogeous taxable income elasticities leads to substantially different optimal tax schedules and in particular, different asymptotic tax rates.

Keywords: optimal taxation; multidimensional screening problems (search for similar items in EconPapers)
JEL-codes: H20 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp5265.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:_5265

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 ().