The Undesirability of Randomized Income Taxation under Decreasing Risk Aversion

Martin Hellwig

No 2005_27, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: For the standard specification of the utilitarian optimal income tax problem with hidden characteristics, the paper shows that randomized tax schemes are undesirable if preferences exhibit a property of weakly decreasing risk aversion according to the multidimensional risk aversion concept of Hellwig (2004). The property of decreasing risk aversion also implies uniqueness of the optimal income tax schedule and continuity in cases where the type distribution has a continuous density.

Keywords: Optimal Income Taxation; Randomized Incentive Schemes; Nonincreasing Risk Aversion (search for similar items in EconPapers)
JEL-codes: H21 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2005-12
New Economics Papers: this item is included in nep-pbe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The undesirability of randomized income taxation under decreasing risk aversion (2007)
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