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Redistributive Taxation in a Roy Model

Florian Scheuer () and Casey Rothschild ()

No 395, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: We consider optimal redistribution in a model where individuals can self-select into one of several possible sectors based on heterogeneity in a multidimensional skill vector. We show that when the government cannot or does not observe the sectoral choice or underlying skills of its citizens, the constrained Pareto frontier can be implemented with a single non-linear income tax. We derive formulas for this optimal tax schedule. Under natural conditions, we show that a many-sector model with self-selection leads to optimal income taxes that are less progressive than the corresponding taxes in a standard single sector model.

Date: 2012
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Journal Article: Redistributive Taxation in the Roy Model (2013) Downloads
Working Paper: Redistributive Taxation in the Roy Model (2012) Downloads
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More papers in 2012 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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