Optimal redistribution with unobservable disability: Welfarist versus non-welfarist social objectives

Pierre Pestieau and Maria Racionero

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Abstract: This paper examines the optimal non-linear income and commodity tax when the same labor disutility can receive two alternative interpretations, taste for leisure or disability, but the disability is not readily observable. We compare the optimal policy under alternative social objectives, welfarist and non-welfarist, and conclude that the non-welfarist objective, in which the planner gives a higher weight to the disutility of labor of the disabled individuals, is the only reasonable specification. It has some foundation in the theory of responsibility; further, unlike the other specifications it yields an optimal solution that may involve a lower labor supply requirement from disabled individuals.

Keywords: Optimal non-linear taxation; Quasi-linear preferences; Asymmetric information; Responsibility (search for similar items in EconPapers)
Date: 2009-08
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Citations: View citations in EconPapers (6)

Published in European Economic Review, 2009, 53 (6), pp.636-644. ⟨10.1016/j.euroecorev.2008.12.002⟩

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Related works:
Journal Article: Optimal redistribution with unobservable disability: Welfarist versus non-welfarist social objectives (2009)
Working Paper: Optimal redistribution with unobservable disability: welfarist versus non-welfarist social objectives (2009)
Working Paper: Optimal redistribution with unobservable disability: Welfarist versus non-welfarist social objectives (2009)
Working Paper: Optimal redistribution with unobservable disability: welfarist versus non-welfarist social objectives (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754340

DOI: 10.1016/j.euroecorev.2008.12.002

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