Well-Being, Poverty, and Labor Income Taxation: Theory and Application to Europe and the United States

Francois Maniquet and Dirk Neumann
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Dirk Neumann: Université catholique de Louvain, LIDAM/CORE, Belgium

No 3200, LIDAM Reprints CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In a model where agents differ in wages and preferences over labor time–consumption bundles, we study labor income tax schemes that alleviate poverty. To avoid conflict with individual well-being, we require redistribution to take place between agents on both sides of the poverty line provided they have the same labor time. This requirement is combined with efficiency and robustness prop- erties. Maximizing the resulting social preferences under incentive compatibility constraints yields the following evaluation criterion: tax schemes should minimize the labor time required to reach the poverty line. We apply this criterion to European countries and the United States.

JEL-codes: H23 H24 I31 I32 J22 (search for similar items in EconPapers)
Pages: 35
Date: 2022-01-01
Note: In: American Economic Journal: Microeconomics, 2021, vol. 13(2), p. 276-310
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