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Skill distribution and the optimal marginal income tax rate

Author

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  • Li, Jinlu
  • Lin, Shuanglin
  • Zhang, Congjun

Abstract

This paper emphasizes the role of skill distribution in determining the optimal marginal tax rates. It rigorously shows that the optimal marginal tax rates can be strictly increasing, strictly decreasing, U-shaped, or inverse U-shaped as skill increases depending on the skill distribution.

Suggested Citation

  • Li, Jinlu & Lin, Shuanglin & Zhang, Congjun, 2013. "Skill distribution and the optimal marginal income tax rate," Economics Letters, Elsevier, vol. 118(3), pages 515-518.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:3:p:515-518
    DOI: 10.1016/j.econlet.2012.12.022
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    References listed on IDEAS

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    1. Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059.
    2. Michel Strawczynski & Momi Dahan, 2000. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 681-686, June.
    3. Diamond, Peter A, 1998. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates," American Economic Review, American Economic Association, vol. 88(1), pages 83-95, March.
    4. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    5. Myles, Gareth D., 2000. "On the optimal marginal rate of income tax," Economics Letters, Elsevier, vol. 66(1), pages 113-119, January.
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    Cited by:

    1. Chengjian Li & Jinlu Li & Shuanglin Lin, 2015. "Optimal Income Tax for China," Pacific Economic Review, Wiley Blackwell, vol. 20(2), pages 243-267, May.
    2. Li, Jinlu & Lin, Shuanglin, 2016. "Optimal income taxation with discrete skill distribution," Mathematical Social Sciences, Elsevier, vol. 83(C), pages 58-70.

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    More about this item

    Keywords

    Marginal income tax rate; Skill distribution; Welfare maximization;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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