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| Title: | | The Pareto-frontier in a simple Mirrleesian model of income taxation  |
| Authors: | | Bierbrauer, Felix Boyer, Pierre C. |
| Issue Date: | | 2010 |
| Series/Report no.: | | Preprints of the Max Planck Institute for Research on Collective Goods 2010,16 |
| Abstract: | | We characterize the Pareto-frontier in a simple Mirrleesian model of income taxation. We show how the second-best frontier which incorporates incentive constraints due to private information on productive abilities relates to the first-best frontier which takes only resource constraints into account. In particular, we argue that the second-best frontier can be interpreted as a Laffer-curve. We also use this second-best frontier for a comparative statics analysis of how optimal income tax rates vary with the degree of inequity aversion, and for a characterization of optimal public-good provision. We show that a more inequity averse policy maker chooses tax schedules that are more redistributive and involve higher marginal tax rates, but chooses a lower public-goods provision level. |
| Subjects: | | Optimal Income Taxation Laffer-Curve Public-Good Provision. |
| JEL: | | H21 H41 D82 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Preprints of the Max Planck Institute for Research on Collective Goods
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