Optimal redistribution with heterogeneous preferences for leisure

This paper examines the properties of the optimal nonlinear income tax when preferences are quasilinear in leisure and heterogeneous. Individuals differ in their ability and in their preferences for leisure. The government seeks to redistribute income. It can perfectly observe the level of endogenous income but cannot observe either ability or preferences. The heterogeneity of preferences leads to problems of comparability between individual utilities which challenge the design of redistributive schemes. In particular, we analyze the consequences of adopting a utilitarian social welfare function where the government is allowed to give different weights to individuals wih different preferences. Under this particular social objective and given the quasilinearity of preferences, we are able to obtain closed-form solutions for the marginal tax rates and to examine the progressivity of the tax system according to the weights used.

• metadata
• relations

Document type	Document de travail (Working Paper)
Access type	Accès libre
Publication date	2001
Collection	CORE Discussion Papers - 2001/25
Affiliation	UCL - CORE - Center for Operations Research and Econometrics
Keywords	Optimal income taxation ; Quasi-linear preferences ; Asymmetric information
Links	http://www.core.ucl.ac.be/services/psfiles/dp01/dp2001-25.pdf http://hdl.handle.net/2078.1/4179[Handle]

See also
	[boreal:137139]	Optimal Redistribution with Heterogeneous Preferences for Leisure