Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159839
Authors: 
Benassi, Corrado
Randon, Emanuela
Year of Publication: 
2015
Series/Report no.: 
Quaderni - Working Paper DSE 1001
Abstract: 
We consider the interplay between income distribution and optimal commodity taxation, linking equity issues to optimal taxes through the effect of income distribution on market demand and its price elasticity. We find conditions to conciliate the equity and efficiency tradeoff and to assess the impact of inequality changes on the optimal taxation of necessity and luxury goods. We show that the regressivity or progressivity of the tax system is determined by the distribution of luxuries and necessities in the economy. If the tax system is regressive (progressive), a decrease (increase) of income inequality leads to an average decrease of the optimal tax rates, achieving welfare gains for society. Our analysis provides a framework to investigate the linkages between direct and indirect taxation.
JEL: 
H21
D63
D11
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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