Weak redistribution and certainty equivalent domination

Stephane Gauthier and Guy Laroque

Journal of Public Economic Theory, 2024, vol. 26, issue 3

Abstract: We assess optimal deterministic nonlinear income taxation in a Mirrlees economy with a continuum of risk‐averse agents whose utilities are quasilinear in labor. A weak redistribution motive makes random taxes more likely socially dominated by the deterministic policy where after‐tax income lotteries are replaced with their certainty equivalents.

Date: 2024
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