Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/38858
Authors: 
Bierbrauer, Felix
Boyer, Pierre C.
Year of Publication: 
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

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