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Well-Being, Poverty and Labor Income Taxation: Theory and Application to Europe and the U.S

Author

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  • Maniquet, François

    (CORE, Université catholique de Louvain)

  • Neumann, Dirk

    (Federal Ministry for Economic Affairs and Climate Action (BMWK), Germany)

Abstract

In a model in which 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 properties. 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 US.

Suggested Citation

  • Maniquet, François & Neumann, Dirk, 2016. "Well-Being, Poverty and Labor Income Taxation: Theory and Application to Europe and the U.S," IZA Discussion Papers 10181, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10181
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    References listed on IDEAS

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    Cited by:

    1. Stéphane Gauthier & Taraneh Tabatabai, 2019. "How incentives matter? An illustration from the targeted subsidies reform in Iran," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 52(1), pages 97-125, January.
    2. Maitreesh Ghatak & François Maniquet, 2019. "Universal Basic Income: Some Theoretical Aspects," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 895-928, August.

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    More about this item

    Keywords

    labor income taxation; poverty; well-being;
    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
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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