Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency

Publicly Provided Private Goods and Redistribution: A General Equilibrium Analysis

“…This effect is similar to the impact of labour supply on the wage rates, originally analysed by Stiglitz (1982) and Stern (1982). The result is also important in that it bears resemblance to the interesting recent findings by Naito (1999) that if wage rates are endogenous, redistribution devices that otherwise would not be applied -in Naito's case public inputs and commodity taxation and in our case public provision of private goods -become welfare-improving.…”

“…Arguments similar to those presented by Naito (1999) might be used to show that public provision could be welfare improving if its technology is unskilled-labour intensive, even if standard separability assumptions of the utility function applied. In addition, our treatment of the dynamic issues of public provision leaves many important issues aside, including examination of pensions in this framework and political economy aspects when looking at intergenerational comparisons.…”

“…It seems to us that in practice the government involvement in public provision is indeed often motivated by the attempt to reduce wage inequality. Allowing for endogenously determined wages is also interesting because it gives rise to new forms of distorting taxation and production inefficiency, along the lines of the important recent contribution by Naito (1999).…”

Direct versus Indirect Taxation: Trends, Theory, and Economic Significance

“…Role of the production side Naito (1999) shows that, even when the gov ernment is using a Pareto-efficient non-linear income tax system under weak separability of workers' utility functions, imposing a non-uniform commodity tax can improve welfare, once the assumption of constant marginal cost of production is abandoned and the production side of the economy is explicitly introduced in the analysis. Cremer et al (2001) show that when individuals differ in several unobservable characteristics (productivity and endow ments), differential commodity taxes do have a role to play as instruments of optimal tax policy -an optimal (general) income tax will not suffice, while the optimal commodity tax rates follow traditional Ramsey rules.…”

On Optimal Skill Distribution in a Mirrleesian Economy

“…While most papers in the SBTC literature are positive studies of the growth and income distribution implications of SBTC, this paper could be interpreted as a normative analysis of the optimal level of SBTC. However, this interpretation of our model should be approached with caution because we treat skilled and unskilled labor as perfect substitutes as in almost all the Mirleesian taxation literature (see Naito (1999) and Stiglitz (1982) for exceptions), contrary to the empirically relevant case of production functions with complementarity.…”