Income Redistribution and Risky Occupational Choices

Panu Poutvaara

The B.E. Journal of Economic Analysis & Policy, 2002, vol. 2, issue 1, 1-19

Abstract: I analyze the effect of linear taxation on discrete choices between risky occupations. In the basic model, two occupations differ in the magnitude of income risks, and citizens differ in their expected productivity in one of the occupations. I derive sufficient conditions under which income redistribution encourages a greater part of the population to choose the riskier occupation associated with higher expected income. The results are then generalized to an arbitrary number of groups of citizens facing an arbitrary number of discrete occupational choices belonging to the same linear distribution class.

Date: 2002
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DOI: 10.2202/1538-0653.1049

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