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Optimal Tax‐Transfer Systems and Redistributive Policy

Author

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  • Johan Fellman
  • Markus Jäntti
  • Peter J. Lambert

Abstract

In this paper we develop “optimal yardsticks” to gauge the effectiveness of given tax and benefit policies in reducing inequality. We show that the conjunction of the optimal tax and optimal benefits policies constitutes the optimal tax‐and‐benefit policy, given the tax and benefit budget sizes. A decomposition formula enables trends in the inequality impact of taxes and benefits to be explained in terms of changing policy effectivess (targeting) and budget size effects. The analysis incorporates a distributional judgement parameter, for sensitivity analysis, and concludes with an examination of the Finnish case for the period 1971–1990. JEL Classification: D63

Suggested Citation

  • Johan Fellman & Markus Jäntti & Peter J. Lambert, 1999. "Optimal Tax‐Transfer Systems and Redistributive Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 115-126, March.
    • Handle: RePEc:bla:scandj:v:101:y:1999:i:1:p:115-126
    DOI: 10.1111/1467-9442.00144
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    Cited by:

    1. Michael McAsey & Libin Mou, 2022. "Transformations that minimize the Gini index of a random variable and applications," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(2), pages 483-502, June.
    2. Esa Karonen & Mikko Niemelä, 2022. "Necessity-Rich, Leisure-Poor: The Long-Term Relationship Between Income Cohorts and Consumption Through Age-Period-Cohort Analysis," Journal of Family and Economic Issues, Springer, vol. 43(3), pages 599-620, September.

    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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