Bunching in rank-dependent optimal income tax schedules
Laurent Simula () and
Alain Trannoy
Additional contact information
Laurent Simula: University of Lyon, ENS de Lyon & UMR GATE
Social Choice and Welfare, 2023, vol. 60, issue 1, No 13, 237-263
Abstract:
Abstract Considering optimal non-linear income tax problems when the social welfare function only depends on ranks as in Yaari (Econometrica 55(1):95–115, 1987) and weights agreeing with the Lorenz quasi-ordering, we extend the analysis of Simula and Trannoy (Am Econ J Econ Policy, 2021) in two directions. First, we establish conditions under which bunching does not occur in the social optimum. We find a sufficient condition on individual preferences, which appears as a reinforcement of the Spence-Mirrlees condition. In particular, the marginal dis-utility of gross income should be convex, but less convex the higher the productivity. We also show that, for all productivity distributions with a log-concave survival function, bunching is precluded under the maximin, Gini, and “illfare-ranked single-series Ginis”. Second, we turn to a discrete population setting, and provide an “ABC” formula for optimal marginal tax rates, which is related to those for a continuum of types found in Simula and Trannoy (2021), but remain essentially distinct.
Date: 2023
References: Add references at CitEc
Citations:
Downloads: (external link)
http://link.springer.com/10.1007/s00355-021-01384-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
Related works:
Working Paper: Bunching in rank-dependent optimal income tax schedules (2023) 
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:spr:sochwe:v:60:y:2023:i:1:d:10.1007_s00355-021-01384-1
Ordering information: This journal article can be ordered from
http://www.springer. ... c+theory/journal/355
DOI: 10.1007/s00355-021-01384-1
Access Statistics for this article
Social Choice and Welfare is currently edited by Bhaskar Dutta, Marc Fleurbaey, Elizabeth Maggie Penn and Clemens Puppe
More articles in Social Choice and Welfare from Springer, The Society for Social Choice and Welfare Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().