IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_364.html
   My bibliography  Save this paper

The Efficient Side of Progressive Income Taxation

Author

Listed:
  • Giacomo Corneo

Abstract

This paper examines the allocative implications of progressive income taxation when individuals care about their relative income. It shows that tax progressivity might improve efficiency, and the more so in egalitarian economies. Introducing a progressive income tax can yield a Pareto improvement if pre-tax income is evenly distributed. Implementing undistorted choices of working hours requires a progressive tax schedule, and the optimal degree of progressivity decreases with pre-tax income inequality.

Suggested Citation

  • Giacomo Corneo, 2000. "The Efficient Side of Progressive Income Taxation," CESifo Working Paper Series 364, CESifo.
    • Handle: RePEc:ces:ceswps:_364
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo_wp364.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Neumark, David & Postlewaite, Andrew, 1998. "Relative income concerns and the rise in married women's employment," Journal of Public Economics, Elsevier, vol. 70(1), pages 157-183, October.
    2. Woittiez, Isolde & Kapteyn, Arie, 1998. "Social interactions and habit formation in a model of female labour supply," Journal of Public Economics, Elsevier, vol. 70(2), pages 185-205, November.
    3. Michael J. Boskin & Eytan Sheshinski, 1978. "Optimal Redistributive Taxation When Individual Welfare Depends upon Relative Income," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(4), pages 589-601.
    4. Ireland, Norman J., 1998. "Status-seeking, income taxation and efficiency," Journal of Public Economics, Elsevier, vol. 70(1), pages 99-113, October.
    5. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    6. repec:bla:scandj:v:97:y:1995:i:4:p:569-80 is not listed on IDEAS
    7. Oswald, Andrew J., 1983. "Altruism, jealousy and the theory of optimal non-linear taxation," Journal of Public Economics, Elsevier, vol. 20(1), pages 77-87, February.
    8. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
    9. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
    10. Jakobsson, Ulf, 1976. "On the measurement of the degree of progression," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 161-168.
    11. Lindert, Peter H., 1996. "What Limits Social Spending?," Explorations in Economic History, Elsevier, vol. 33(1), pages 1-34, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sámano Daniel, 2009. "Explaining Taxes at the Upper Tail of the Income Distribution: The Role of Utility Interdependence," Working Papers 2009-16, Banco de México.
    2. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 963-1002.
    3. Armin Falk & Markus Knell, "undated". "Choosing the Joneses On the Endogeneity of Reference Groups," IEW - Working Papers 053, Institute for Empirical Research in Economics - University of Zurich.
    4. Adrian de la Garza & Giovanni Mastrobuoni & Atsushi Sannabe & Katsunori Yamada, 2010. "The Relative Utility Hypothesis With and Without Self-reported Reference Wages," ISER Discussion Paper 0798, Institute of Social and Economic Research, Osaka University, revised Jul 2012.
    5. Samuel Bowles & Yongjin Park, 2005. "Emulation, Inequality, and Work Hours: Was Thorsten Veblen Right?," Economic Journal, Royal Economic Society, vol. 115(507), pages 397-412, November.
    6. Bilancini, Ennio & Boncinelli, Leonardo, 2019. "Wage inequality, labor income taxes, and the notion of social status," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-35.
    7. Mujcic, Redzo & Frijters, Paul, 2015. "Conspicuous consumption, conspicuous health, and optimal taxation," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 59-70.
    8. Ok, Efe A. & Sethi, Rajiv & Kockesen, Levent, 1997. "Interdependent Preference Formation," Working Papers 97-18, C.V. Starr Center for Applied Economics, New York University.
    9. Laszlo Goerke & Michael Neugart, 2021. "Social preferences, monopsony and government intervention," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(2), pages 864-891, May.
    10. Ferrer-i-Carbonell, Ada, 2005. "Income and well-being: an empirical analysis of the comparison income effect," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 997-1019, June.
    11. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2006. "Income and happiness: Evidence, explanations and economic implications," PSE Working Papers halshs-00590436, HAL.
    12. Clark, Andrew E. & Oswald, Andrew J., 1998. "Comparison-concave utility and following behaviour in social and economic settings," Journal of Public Economics, Elsevier, vol. 70(1), pages 133-155, October.
    13. Graafland, J.J., 2010. "Why Status Effects Need not Justify Egalitarian Income Policy," Other publications TiSEM 80b51970-7e15-499e-9b39-8, Tilburg University, School of Economics and Management.
    14. Gallice, Andrea, 2018. "Social status, preferences for redistribution and optimal taxation: A survey," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-17.
    15. Corazzini, Luca & Esposito, Lucio & Majorano, Francesca, 2012. "Reign in hell or serve in heaven? A cross-country journey into the relative vs absolute perceptions of wellbeing," Journal of Economic Behavior & Organization, Elsevier, vol. 81(3), pages 715-730.
    16. Tom Truyts, 2010. "Social Status In Economic Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 24(1), pages 137-169, February.
    17. Donald Bruce & Langchuan Peng, 2018. "Optimal taxation in the presence of income-dependent relative income effects," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 51(2), pages 313-335, August.
    18. Peter Kooreman & Lambert Schoonbeek, 2004. "Characterizing Pareto Improvements in an Interdependent Demand System," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(3), pages 427-443, August.
    19. Goerke, Laszlo, 2013. "Relative consumption and tax evasion," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 52-65.
    20. Drakopoulos, Stavros A., 2008. "The Concept Of Comparison Income: An Historical Perspective," MPRA Paper 8713, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_364. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.