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Optimal tax problems with multidimensional heterogeneity: a mechanism design approach

Author

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  • Laurence Jacquet

    (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

  • Etienne Lehmann

    (CRED - Centre de Recherche en Economie et Droit - Université Paris-Panthéon-Assas, CEPR - Center for Economic Policy Research, CESifo - Center for Economic Studies - Ifo Institute - CESifo GmbH, TEPP - Théorie et évaluation des politiques publiques - CNRS - Centre National de la Recherche Scientifique)

Abstract

We propose a new method, that we call an allocation perturbation, to derive the optimal nonlinear income tax schedules with multidimensional individual characteristics on which taxes cannot be conditioned. It is well established that, when individuals differ in terms of preferences on top of their skills, optimal marginal tax rates can be negative. In contrast, we show that with heterogeneous behavioral responses and skills, one has optimal positive marginal tax rates, under utilitarian preferences and maximin.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Laurence Jacquet & Etienne Lehmann, 2021. "Optimal tax problems with multidimensional heterogeneity: a mechanism design approach," Post-Print hal-04966461, HAL.
    • Handle: RePEc:hal:journl:hal-04966461
    DOI: 10.1007/s00355-021-01349-4
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    Cited by:

    1. is not listed on IDEAS
    2. Hirofumi Takikawa, 2023. "Optimal Income Taxation and Formalization of the Informal Economy," Working Papers e189, Tokyo Center for Economic Research.

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