Optimal income taxation and the ability distribution: implications for migration equilibria

Jonathan Hamilton and Pierre Pestieau

No 2002036, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: As recently argued by Diamond [1998], one of the key factors explaining the progressivity of an optimal non-linear income tax is the distribution of productivity among workers. Migration is one source of changes in the productivity distribution. How changes in the population's ability distribution affect optimal income tax schedules has received little attention. Changing the distribution generally changes both the objective function and the government budget constraint. We first consider the comparative statics of the fraction of highly-skilled workers with a Rawlsian welfare function (so that only the second effect is present) and a quasi-linear utility function. We perform the same analysis for a despotic social welfare function, and present some results for a utilitarian social welfare function. We study the interaction between mobility and redistributive taxation. We consider mobility by either the skilled or unskilled population in both Rawlsian and majority voting frameworks where governments take the population as fixed. Our main result is that equal ability distributions across jurisdictions is a stable equilibrium when the unskilled are mobile, but only under certain conditions when the skilled are mobile.

Date: 2002-06
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://sites.uclouvain.be/core/publications/coredp/coredp2002.html (text/html)

Related works:
Journal Article: Optimal Income Taxation and the Ability Distribution: Implications for Migration Equilibria (2005)
Working Paper: Optimal Income Taxation and the Ability Distribution: Implications for Migration Equilibria (2005)
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:cor:louvco:2002036

Access Statistics for this paper

More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Alain GILLIS ().