Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284205 
Year of Publication: 
2022
Series/Report no.: 
IFS Working Papers No. 22/35
Publisher: 
Institute for Fiscal Studies (IFS), London
Abstract: 
We assess the usefulness of stochastic redistribution among a continuum of risk-averse agents with quasilinear utilities in labor. Agents differ according to their consumption tastes, which remain private information. We identify circumstances where stochastic redistribution is socially dominated by the deterministic policy where after-tax income lotteries are replaced with their certainty equivalent. We also provide a parametric example where feasible and incentive compatible lotteries locally dominate the optimal deterministic menu. In this example the downward pattern of incentives prevailing in the deterministic case is reversed to an upward pattern in the stochastic case.
Subjects: 
redistribution
asymmetric information
random taxes
certainty equivalent
JEL: 
C61
D82
D86
H21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
415.88 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.