Progressive taxation in a tournament economy

Jeffrey Carpenter, Peter Matthews and Benjamin Tabb

Journal of Public Economics, 2016, vol. 143, issue C, 64-72

Abstract: Not enough is known about the responsiveness of individuals, in particular those who work under different incentives, to changes in marginal tax rates. We ask whether changes in tax rates are less distortionary for workers engaged in a contest. To examine this potential rationale for a more progressive tax code, we first model the effort decisions of workers faced with progressive taxation under tournaments and piece rates. Because of the difficulty identifying any distortion that may be induced by the tax code in naturally occurring data, we then report on the results of a real-effort experiment based on this model. Consistent with a behavioral approach to public finance, we find that competitive tournament workers are less sensitive and hint, in our discussion, at the possible welfare benefits of progressive taxation in tournament economies.

Keywords: Taxation; Tournaments; Public good; Real effort experiment (search for similar items in EconPapers)
JEL-codes: C91 H20 H41 J22 J33 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (7)

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Working Paper: Progressive Taxation in a Tournament Economy (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:143:y:2016:i:c:p:64-72

DOI: 10.1016/j.jpubeco.2016.08.008

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