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Well-Being, Poverty, and Labor Income Taxation: Theory and Application to Europe and the United States

Author

Listed:
  • Maniquet, François

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Neumann, Dirk

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

Abstract

In a model where agents differ in wages and preferences over labor time–consumption bundles, we study labor income tax schemes that alleviate poverty. To avoid conflict with individual well-being, we require redistribution to take place between agents on both sides of the poverty line provided they have the same labor time. This requirement is combined with efficiency and robustness prop- erties. Maximizing the resulting social preferences under incentive compatibility constraints yields the following evaluation criterion: tax schemes should minimize the labor time required to reach the poverty line. We apply this criterion to European countries and the United States.

Suggested Citation

  • Maniquet, François & Neumann, Dirk, 2022. "Well-Being, Poverty, and Labor Income Taxation: Theory and Application to Europe and the United States," LIDAM Reprints CORE 3200, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:3200
    DOI: https://www.aeaweb.org/articles?id=10.1257/mic.20180269
    Note: In: American Economic Journal: Microeconomics, 2021, vol. 13(2), p. 276-310
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    References listed on IDEAS

    as
    1. Emmanuel Saez & Stefanie Stantcheva, 2016. "Generalized Social Marginal Welfare Weights for Optimal Tax Theory," American Economic Review, American Economic Association, vol. 106(1), pages 24-45, January.
    2. Boadway, Robin, 2012. "From Optimal Tax Theory to Tax Policy: Retrospective and Prospective Views," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262017113, April.
    3. Bruce D. Meyer & James X. Sullivan, 2012. "Identifying the Disadvantaged: Official Poverty, Consumption Poverty, and the New Supplemental Poverty Measure," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 111-136, Summer.
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    Cited by:

    1. Domenico Moramarco & Bram De Rock, 2022. "Nonparametric analysis of heterogeneous multidimensional fairness," Working Papers 621, ECINEQ, Society for the Study of Economic Inequality.
    2. Germain, Antoine, 2023. "Basic income versus fairness: redistribution with inactive agents," LIDAM Discussion Papers CORE 2023022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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