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When Redistribution Leads to Regressive Taxation

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  • CYRIL HARITON
  • GWENAËL PIASER

Abstract

We introduce labor contracts in a framework of optimal redistribution: firms have some local market power and try to discriminate among heterogeneous workers. In this setting we show that if the firms have perfect information, i.e., they perfectly discriminate against workers and take all the surplus, the best tax function is flat. If firms have imperfect information, i.e., if they offer incentive contracts, then (under some assumptions) the best redistributive taxation is regressive.

Suggested Citation

  • Cyril Hariton & Gwenaël Piaser, 2007. "When Redistribution Leads to Regressive Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(4), pages 589-606, August.
    • Handle: RePEc:bla:jpbect:v:9:y:2007:i:4:p:589-606
    DOI: 10.1111/j.1467-9779.2007.00321.x
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    References listed on IDEAS

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    Cited by:

    1. Albert Jan Hummel, 2021. "Monopsony Power, Income Taxation and Welfare," CESifo Working Paper Series 9128, CESifo.
    2. Eren Gürer, 2022. "Rising markups and optimal redistributive taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(5), pages 1227-1259, October.
    3. Hummel, Albert Jan, 2023. "Tax curvature," Journal of Public Economics, Elsevier, vol. 224(C).
    4. Граборов С.В., 2019. "Мажоритарная Оптимизация Налогообложения Доходов И Имущества Граждан," Журнал Экономика и математические методы (ЭММ), Центральный Экономико-Математический Институт (ЦЭМИ), vol. 55(4), pages 28-42, октябрь.
    5. Albert Jan Hummel, 2021. "Monopsony power, income taxation and welfare," Tinbergen Institute Discussion Papers 21-051/VI, Tinbergen Institute.
    6. Mathias, HUNGERBUEHLER, 2004. "The impact of Union Power on the Optimal Income Tax Schedule," LIDAM Discussion Papers IRES 2004034, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    7. Albert Jan Hummel, 2021. "Tax Curvature," CESifo Working Paper Series 9220, CESifo.

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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