De Gustibus non est Taxandum: Heterogeneity in preferences and optimal redistribution

Benjamin Lockwood and Matthew Weinzierl ()

Journal of Public Economics, 2015, vol. 124, issue C, 74-80

Abstract: The prominent but unproven intuition that preference heterogeneity reduces redistribution in a standard optimal tax model is shown to hold under the plausible condition that the distribution of preferences for consumption relative to leisure rises, in terms of first-order stochastic dominance, with income. Given familiar functional form assumptions on utility and the distributions of ability and preferences, a simple statistic for the effect of preference heterogeneity on marginal tax rates is derived. Numerical simulations and suggestive empirical evidence demonstrate the link between this potentially measurable statistic and the quantitative implications of preference heterogeneity for policy.

Keywords: Optimal taxation; Preference heterogeneity; Redistribution; Sufficient statistics (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (49)

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Related works:
Working Paper: De Gustibus non est Taxandum: Heterogeneity in Preferences and Optimal Redistribution (2014)
Working Paper: De Gustibus non est Taxandum: Heterogeneity in Preferences and Optimal Redistribution (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:124:y:2015:i:c:p:74-80

DOI: 10.1016/j.jpubeco.2015.01.002

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