EconPapers    
Economics at your fingertips  
 

Doing Wonders with an Egg: Optimal Re‐distribution When Households Differ in Market and Non‐Market Abilities

Alessandro Balestrino, Alessandro Cigno and Anna Pettini

Journal of Public Economic Theory, 2003, vol. 5, issue 3, 479-498

Abstract: The paper studies non‐linear income taxation and linear commodity taxation in a household production context with households differentiated by market and non‐market ability. In such a setting, there is an efficiency motive for re‐distribution which is independent from the usual equity motive, and operates also when the social planner is indifferent to utility inequality. As a consequence, some of the policy prescriptions applicable to the case in which households differ in market ability only do not hold when households differ also in non‐market ability. For instance, re‐distribution is not necessarily from high‐ to low‐wage households, and it is not necessarily true that the marginal rate of income tax should be zero for high incomes and positive for low incomes. In some cases, re‐distribution may accentuate rather than lessen utility inequality, and can reverse the direction of income inequality relative to the laissez‐faire equilibrium. Furthermore, contrary to Atkinson‐Stiglitz, it may be optimal to use indirect and direct taxation simultaneously even when the utility function is separable in commodities and labour.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://doi.org/10.1111/1467-9779.00144

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:5:y:2003:i:3:p:479-498

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1097-3923

Access Statistics for this article

Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders

More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-03-19
Handle: RePEc:bla:jpbect:v:5:y:2003:i:3:p:479-498