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Implementing Allocations through the Tax System
| Content Provider | Semantic Scholar |
|---|---|
| Author | Renes, Sander Zoutman, Floris T. |
| Copyright Year | 2013 |
| Abstract | We study how to implement an incentive compatible allocation in the market through a tax system in a setting where agents make multiple choices and are heterogeneous in multiple characteristics. An example shows that the canonical tax system proposed in Mirrlees (1976) is sometimes incapable of implementing the desired allocation. We derive necessary and sucient conditions for a tax system to implement the allocation. These conditions can be used to check whether a proposed tax system implements the allocation. We show that such a check is not necessary if the allocation is bijective. In addition, we show that a monotonic or convex tax system can always implement the second-best provided i.) taxes are equated to wedges, ii.) the allocation is second-best to a welfarist planner and iii.) there are no externalities. The Mirrleesian implementation is eective if it meats these criteria, and it often does. Our work provides economists with a toolbox to design the optimal tax schedule. In addition, it sheds new light on sources of complexity in real-world tax and benet systems. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://www.nhh.no/globalassets/departments/business-and-management-science/seminars/2013-spring/040613.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
