Optimal redistribution with heterogeneous preferences for leisure

Robin Boadway, M. Marchand, Pierre Pestieau and Maria Racionero

No 2001025, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper examines the properties of the optimal nonlinear income tax when preferences are quasilinear in leisure and heterogeneous. Individuals differ in their ability and in their preferences for leisure. The government seeks to redistribute income. It can perfectly observe the level of endogenous income but cannot observe either ability or preferences. Theheterogeneity of preferences leads to problems of comparability between individual utilities which challenge the design of redistributive schemes. In particular, we analyze the consequences of adopting a utilitarian socialwelfare function where the government is allowed to give different weights to individuals wih different preferences. Under this particular social objective and given the quasilinearity of preferences, we are able to obtain closed-form solutions for the marginal tax rates and to examine the progressivity of the tax system according to the weights used.

Keywords: optimal income taxation; quasi-linear preferences; asymmetric information (search for similar items in EconPapers)
JEL-codes: H21 H41 (search for similar items in EconPapers)
Date: 2001-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Optimal Redistribution with Heterogeneous Preferences for Leisure (2002)
Working Paper: Optimal redistribution with heterogeneous preferences for leisure (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2001025

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