The Efficient Side of Progressive Income Taxation

Giacomo Corneo

No 364, CESifo Working Paper Series from CESifo

Abstract: This paper examines the allocative implications of progressive income taxation when individuals care about their relative income. It shows that tax progressivity might improve efficiency, and the more so in egalitarian economies. Introducing a progressive income tax can yield a Pareto improvement if pre-tax income is evenly distributed. Implementing undistorted choices of working hours requires a progressive tax schedule, and the optimal degree of progressivity decreases with pre-tax income inequality.

Keywords: Progressive income tax; inequality; social status (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The efficient side of progressive income taxation (2002)
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