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Di ↵ erential Taxation and Occupational Choice ⇤
| Content Provider | Semantic Scholar |
|---|---|
| Author | Gomes, Renato Lozachmeur, Jean-Marie Pavan, Alessandro |
| Copyright Year | 2014 |
| Abstract | We study nonlinear income taxation in a Roy model in which agents’ productivity is sectorspecific. We show that when income taxes can be sector-specific, the Diamond-Mirrlees theorem (according to which the second-best displays production e ciency) fails: social welfare (be it Rawlsian or Weighed Utilitarian) can be increased by assigning some agents to their least productive sector. By sacrificing production e ciency, the planner incurs second-order losses in total output, but obtains a first-order reduction in the informational costs of redistribution. The same result obtains when the government is constrained to a uniform income tax schedule, as long as sales taxes can be made sector-specific. In this latter case, our result also implies failure of the Atkinson-Stiglitz theorem (according to which, when preferences over consumption and leisure are separable, as they are in our economy, the second-best can be implemented with zero sales taxes). |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://faculty.wcas.northwestern.edu/~apa522/taxocc-2014-07-30.pdf |
| Language | English |
| Access Restriction | Open |
| Subject Keyword | Anemia, Diamond-Blackfan Arabic numeral 0 Diabetes Insipidus Financial cost First-order reduction Income Tax Nonlinear system Social Welfare Taxes informational |
| Content Type | Text |
| Resource Type | Article |
