The Pareto-Frontier in a simple Mirrleesian model of income taxation

Felix Bierbrauer () and Pierre Boyer
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Felix Bierbrauer: Max Planck Institute for Research on Collective Goods, Bonn

No 2010_16, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: We characterize the Pareto-frontier in a simple Mirrleesian model of income taxation. We show how the second-best frontier which incorporates incentive constraints due to private information on productive abilities relates to the first-best frontier which takes only resource constraints into account. In particular, we argue that the second-best frontier can be interpreted as a Laer-curve. We also use this second-best frontier for a comparative statics analysis of how optimal income tax rates vary with the degree of inequity aversion, and for a characterization of optimal public-good provision. We show that a more inequity averse policy maker chooses tax schedules that are more redistributive and involve higher marginal tax rates, but chooses a lower public-goods provision level.

Keywords: Optimal Income Taxation; Public-good provision; Laer-Curve (search for similar items in EconPapers)
JEL-codes: D82 H21 H41 (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-cta, nep-pbe and nep-pub
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: The Pareto-Frontier in a Simple Mirrleesian Model of Income Taxation (2014)
Working Paper: The Pareto-Frontier in a Simple Mirrleesian Model of Income Taxation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2010_16

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