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Title:The Pareto-frontier in a simple Mirrleesian model of income taxation PDF Logo
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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