Dynamic income taxation, redistribution, and the ratchet effect

Dillén, Mats; Lundholm, Michael

doi:10.1016/0047-2727(94)01491-4

Cited by 28 publications

(27 citation statements)

References 13 publications

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“…Our analysis parallels the approaches by Andersson (1996), Boadway, Marceau and Marchand (1996), Dillén and Lundholm (1996), and Konrad (2001) who highlight several other strategic aspects related to governmental redistributional policy. Our paper is also related to a new line of research in optimal direct taxation that gives it an important role and empirical relevance.…”

supporting

confidence: 52%

Union Strategy and Optimal Income Taxation

Kessing

Konrad

2005

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. ABSTRACT Union Strategy and Optimal Income TaxationRestrictions on work hours are more important in countries with a large welfare state. We show that this empirical observation is consistent with the strategic effects of such restrictions in a welfare state in the context of optimal direct taxation in the tradition of Mirrlees (1971). Our results also apply to non-welfarist states which have income redistribution, but not in purely extortionary states.JEL Classification: H21, H23

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confidence: 52%

Union Strategy and Optimal Income Taxation

Kessing

Konrad

2005

SSRN Journal

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“…3 SeeDillén and Lundholm (1996) and more recentlyBerlianty and Ledyard (2005) for a dynamic optimal income taxation problem without commitment.…”

mentioning

confidence: 99%

Disability insurance and optimal income taxation

Lozachmeur

2006

Int Tax Public Finan

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This paper studies the design of disability insurance scheme when agents differ in their privately known productivity. We extend the Diamond and Mirrlees (1978) two period model to allow for agents differing ex-ante in their productivity and characterize the optimal nonlinear tax transfer that maximizes a utilitarian welfare function when per-period earnings and age are observable while individuals’ productivity and health status are not observable. We show that the induced tax/benefit scheme should exhibit a marginal income tax that decreases with age for some agents. A marginal subsidy on the young high productive income may be desirable. While the disability scheme always involves the old low productive agents to be indifferent between working and claiming disability benefits, this result is not always true for the old high productive agents. Copyright Springer Science + Business Media, LLC 2006Optimal income taxation, Disability insurance,

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“…A comparable ratchet effect also causes the inefficiency in this paper: the members of the young generation in the first period may reveal their productivity type during their working life, and the government in the second period can use this information to redistribute within the old generation. However, the general equilibrium, overlapping generations setup, and the results of this paper differ fundamentally from the labor supply model without capital accumulation in Dillen and Lundholm (1996).…”

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confidence: 75%

Time Consistent Optimal Redistribution Policy in an Overlapping Generations Model

Lorz

2004

J Public Economic Theory

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This paper analyzes optimal redistribution policy in a two-period version of the overlapping generations model with heterogeneous individuals and asymmetric information between the government and the private sector. The government of the first period determines redistribution transfers for the first period but is not able to set the policy variables for the second period. With respect to savings the paper considers two scenarios: In the first scenario savings are observable and the government can set individual savings levels in addition to redistributive transfers. In the second scenario savings and capital incomes are not observable. In both cases the redistribution equilibrium is not second-best efficient.

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Dynamic income taxation, redistribution, and the ratchet effect

Cited by 28 publications

References 13 publications

Union Strategy and Optimal Income Taxation

Union Strategy and Optimal Income Taxation

Disability insurance and optimal income taxation

Time Consistent Optimal Redistribution Policy in an Overlapping Generations Model

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