Designing Optimal Taxes With a Microeconometric Model of Household Labour Supply

Rolf Aaberge and Ugo Colombino

Public Economics from University Library of Munich, Germany

Abstract: This paper is concerned with the empirical analyses of optimal taxation, adopting Equality of Outcome (EO) as well as Equality of Opportunity (EOp) as evaluation criteria. The EOp- and EO-criteria provide alternative methods for summarizing the efficiency-equality trade-off in the distribution of individual welfare. We also compare the results depending on whether we use income or money-metric utility as a measure of individual welfare. We estimate micro-econometric models of household labour supply and corresponding individual welfare measures based on 1995 Norwegian data for both married couples and singles. We then use these models to simulate behavioural responses and welfare gains and losses of various constant-revenue four-parameter tax rules, i.e. the tax rules defined by a lump-sum transfer (positive or negative), two marginal tax rates and a “kink point” that produces the same revenue collected with the observed 1995 rules. Using the various EOp- and EO- critera as a basis for evaluating and comparing these tax rules, EOp- and EO-optimal tax rules are identified.

Keywords: Optimal Taxation; Labour Supply; Microeconometric Models (search for similar items in EconPapers)
JEL-codes: D6 D7 H (search for similar items in EconPapers)
Pages: 29 pages
Date: 2005-10-13
New Economics Papers: this item is included in nep-pbe and nep-pub
Note: Type of Document - pdf; pages: 29
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply (2008)
Working Paper: Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply (2008)
Working Paper: Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply (2006)
Working Paper: Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply (2006)
Working Paper: Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply (2006)
Working Paper: Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwppe:0510013

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