How Does Predistribution Affect Redistribution?

Ravi Kanbur and Matti Tuomala ()
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Matti Tuomala: Tampere University and Finnish Centre of Excellence in Tax Systems Research (FIT)

No 19, Working Papers from Finnish Centre of Excellence in Tax Systems Research

Abstract: This paper presents an analysis of the consequences for redistribution policies of achieving a more equal predistribution, that is, a more equal distribution of the predetermined income earning capabilities that individuals bring to the market. We show that optimal fiscal policies are less redistributive when the predistribution is more equal. We then quantify the value of a more equal predistribution. We show that total consumption is higher with a more equal predistribution. We also develop a money metric measure of social welfare and show that a more equal predistribution increases this measure for a Utilitarian and Prioritarian Social Welfare Function but may decrease it for the Maximin.

Keywords: Predistribution; Redistribution; Optimal Non-linear Taxation; Marginal Tax Rates; Social Welfare Function (search for similar items in EconPapers)
JEL-codes: D31 H21 (search for similar items in EconPapers)
Pages: 28
Date: 2024-01
New Economics Papers: this item is included in nep-pbe, nep-pub and nep-upt
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Published in FIT Working Paper Series, Finnish Center of Excellence in Tax Systems Research

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Related works:
Working Paper: How Does Predistribution Affect Redistribution? (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fit:wpaper:19

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