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Title:On the optimality of optimal income taxation PDF Logo
Authors:Bierbrauer, Felix J.
Issue Date:2010
Series/Report no.:CESifo working paper: Public Finance 3163
Abstract:The Mirrleesian model of income taxation restricts attention to simple allocation mechanism with no strategic interdependence, i.e., the optimal labor supply of any one individual does not depend on the labor supply of others. It has been argued by Piketty (1993) that this restriction is substantial because more sophisticated mechanisms can reach first-best allocations that are out of reach with simple mechanisms. In this paper, we assess the validity of Piketty's critique in an independent private values model. As a main result, we show that the optimal sophisticated mechanism is a simple mechanism, or, equivalently, a Mirrleesian income tax system.
Subjects:optimal income taxation
mechanism design
JEL:D82
D86
H21
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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