The Pareto-Frontier in a Simple Mirrleesian Model of Income Taxation

Felix Bierbrauer and Pierre Boyer

No 4399, CESifo Working Paper Series from CESifo

Abstract: We characterize the Pareto-frontier in a simple Mirrleesian model of income taxation. We show how the second-best frontier which incorporates incentive constraints due to private information on productive abilities relates to the first-best frontier which takes only resource constraints into account. In particular, we argue that the second-best frontier can be interpreted as a Laffer-curve. We also use this second-best frontier for a comparative statics analysis of how optimal income tax rates vary with the degree of inequity aversion, and for a characterization of optimal public-good provision. We show that a more inequity averse policy maker chooses tax schedules that are more redistributive and involve higher marginal tax rates, while simultaneously providing less public good.

Keywords: optimal income taxation; Laffer-curve; public-good provision (search for similar items in EconPapers)
JEL-codes: D82 H21 H41 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Pareto-Frontier in a Simple Mirrleesian Model of Income Taxation (2014)
Working Paper: The Pareto-Frontier in a simple Mirrleesian model of income taxation (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4399

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