Optimal Nonlinear Income Taxation For Reduction Of Envy

Yukihiro Nishimura
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Yukihiro Nishimura: Yokohama National University and Queen's University

No 991, Working Paper from Economics Department, Queen's University

Abstract: This paper examines the optimal nonlinear income taxation problem based on Chaudhuri (1986) and Diamantaras and Thomson's (1990) λ-equitability in a two-class economy. An allocation is λ-equitable if no agent envies a proportion λ of the bundle of any other agent. We examine the properties of Pareto undominated allocations for various λ-equitability requirements. When there is one output, the marginal income tax rate can increase only if (but not if) leisure is a luxury. In a multi-commodity model with commodity taxes, the goods preferred by the low skilled agent and/or of high Hicksian elasticities are taxed more heavily.

Keywords: Income Taxation; Envy (search for similar items in EconPapers)
JEL-codes: D63 H21 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2000-02
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:991

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