The Pareto-Frontier in a Simple Mirrleesian Model of Income Taxation

Pierre Boyer and Felix J. Bierbrauer

Annals of Economics and Statistics, 2014, issue 113-114, 185-206

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 Laffer-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, while simultaneously providing less public good.

Date: 2014
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http://www.jstor.org/stable/10.15609/annaeconstat2009.113-114.185 (text/html)

Related works:
Working Paper: The Pareto-Frontier in a Simple Mirrleesian Model of Income Taxation (2013)
Working Paper: The Pareto-Frontier in a simple Mirrleesian model of income taxation (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2014:i:113-114:p:185-206

DOI: 10.15609/annaeconstat2009.113-114.185

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