Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/223515 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8443
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
We consider optimal non-linear income tax problems when the social welfare function only depends on ranks as in Yaari (1987) and weights agree with the Lorenz quasi-ordering. Gini, S-Gini, and a class putting more emphasis on inequality in the upper part of the distribution belong to this set. Adopting a first-order approach, we establish marginal tax formula assuming a continuous population framework, and derive conditions on the primitives of the model for which the socially optimal allocation is either fully separating or involves some bunching. For all log-concave survival functions, bunching is precluded for the maximin, Gini, and ”illfare-ranked single-series Ginis”. We then turn to a discrete population setting, and provide ”ABC” formulas for optimal marginal tax rates, which are related to those for a continuum of types but remain essentially distinct.
Subjects: 
rank dependence
Gini
optimal income taxation
bunching
log-concavity
JEL: 
D63
D82
H21
Document Type: 
Working Paper
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