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Normative Analysis with Societal Constraints

Author

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  • Robin Boadway
  • Nicolas-Guillaume Martineau

Abstract

This paper examines the question of achieving a societal consensus around redistributive policies. Its extent is measured by the degree of work participation among the different skill classes that populate the economy. This consensus is driven both by the material incentives and heterogeneous preferences for leisure of each skill class, and an endogenous social norm, which embodies societal attitudes towards distributive justice. Results for optimal redistributive taxation in the presence of an extensive margin of participation show that when a norm is present, participation taxes are generally lower (resp. higher) than when it is not, whenever it enters as a benefit or cost for participants (resp. a cost for non-participants). In the event of multiple participation equilibria, it is examined how changes in the progressivity of taxation may induce shifts in equilibria. This multiplicity of equilibria is thereafter exploited as a constraint on the social planner, which views societal consensus as an objective.

Suggested Citation

  • Robin Boadway & Nicolas-Guillaume Martineau, 2013. "Normative Analysis with Societal Constraints," CESifo Working Paper Series 4305, CESifo.
    • Handle: RePEc:ces:ceswps:_4305
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    References listed on IDEAS

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    6. George A. Akerlof, 1980. "A Theory of Social Custom, of which Unemployment may be One Consequence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 749-775.
    7. Dufwenberg, Martin & Lundholm, Michael, 2001. "Social Norms and Moral Hazard," Economic Journal, Royal Economic Society, vol. 111(473), pages 506-525, July.
    8. Matteo Cervellati & Joan-Maria Esteban & Laurence Kranich, 2010. "Work Values, Endogenous Sentiments and Redistribution," Working Papers 434, Barcelona School of Economics.
    9. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
    10. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 1039-1073.
    11. Barr, Nicholas, 2004. "Economics of the Welfare State," OUP Catalogue, Oxford University Press, edition 4, number 9780199264971.
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    13. Diamond, P., 1980. "Income taxation with fixed hours of work," Journal of Public Economics, Elsevier, vol. 13(1), pages 101-110, February.
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    Cited by:

    1. David Madden & Michael Savage, 2020. "Which households matter most? Capturing equity considerations in tax reform via generalised social marginal welfare weights," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(1), pages 153-193, February.
    2. David (David Patrick) Madden & Michael Savage, 2015. "Which Households Matter Most? Capturing Equity Considerations in Tax Reform via Generalised Social Marginal Welfare Weights," Working Papers 201502, School of Economics, University College Dublin.

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    More about this item

    Keywords

    optimal taxation; societal consensus; social norms; work participation; distributive justice; redistribution;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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