IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/3288.html
   My bibliography  Save this paper

Pareto Efficient Tax Structures

Author

Listed:
  • Dagobert L. Brito
  • Jonathan H. Hamilton
  • Steven M. Slutsky
  • Joseph E. Stiglitz

Abstract

Most analyses of optimal income taxation make restrictive technical assumptions on preferences (such as single-crossing) and only derive properties of welfare-maximizing tax schedules. Here, for an economy with any finite numbers of groups and commodities, Pareto efficient tax structures are described assuming only continuity and monotonicity of preferences. Most results follow directly from a property of self-selection: at an optimum, one group will never envy the bundle of another group which pays a larger total tax. The bundle of a group paying the largest total tax is undistorted. Assuming normality, undistorted outcomes for a group form a connected segment on the constrained utility possibility frontier. The tax structure at distorted outcomes is also described.

Suggested Citation

  • Dagobert L. Brito & Jonathan H. Hamilton & Steven M. Slutsky & Joseph E. Stiglitz, 1990. "Pareto Efficient Tax Structures," NBER Working Papers 3288, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3288
    Note: PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w3288.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
    2. Guesnerie, Roger & Seade, Jesus, 1982. "Nonlinear pricing in a finite economy," Journal of Public Economics, Elsevier, vol. 17(2), pages 157-179, March.
    3. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
    4. Brito, Dagobert L. & Hamilton, Jonathan H. & Slutsky, Steven M. & Stiglitz, Joseph E., 1995. "Randomization in optimal income tax schedules," Journal of Public Economics, Elsevier, vol. 56(2), pages 189-223, February.
    5. 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.
    6. Efraim Sadka, 1976. "On Income Distribution, Incentive Effects and Optimal Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(2), pages 261-267.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Helmuth Cremer & Firouz Gahvari & Norbert Ladoux, 2001. "Second‐Best Pollution Taxes and the Structure of Preferences," Southern Economic Journal, John Wiley & Sons, vol. 68(2), pages 258-280, October.
    2. Bierbrauer, Felix & Brett, Craig & Weymark, John A., 2013. "Strategic nonlinear income tax competition with perfect labor mobility," Games and Economic Behavior, Elsevier, vol. 82(C), pages 292-311.
    3. da Costa, Carlos E. & Severo, Tiago, 2008. "Education, preferences for leisure and the optimal income tax schedule," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 113-138, February.
    4. Kokovin Sergey & Zhelobodko Evgeniy, 2008. "Overall Inefficiency and Cycles in Non-ordered Screening under Capacity Constraints and Standardization," EERC Working Paper Series 08/03e, EERC Research Network, Russia and CIS.
    5. Craig Brett & John A. Weymark, 2019. "Optimal nonlinear taxation of income and savings without commitment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(1), pages 5-43, February.
    6. Sergey Kokovin & Babu Nahata, 2017. "Method of Digraphs for Multi-dimensional Screening," Annals of Operations Research, Springer, vol. 253(1), pages 431-451, June.
    7. Brito, Dagobert L. & Hamilton, Jonathan H. & Slutsky, Steven M. & Stiglitz, Joseph E., 1995. "Randomization in optimal income tax schedules," Journal of Public Economics, Elsevier, vol. 56(2), pages 189-223, February.
    8. Andersson, Tommy, 2005. "Profit maximizing nonlinear pricing," Economics Letters, Elsevier, vol. 88(1), pages 135-139, July.
    9. Thomas Gaube, 2000. "Efficient Public Good Provision with Nonlinear Income Taxation," Econometric Society World Congress 2000 Contributed Papers 0850, Econometric Society.
    10. Helmuth Cremer & Maurice Marchand & Pierre Pestieau, 1996. "Interregional redistribution through tax surcharge," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(2), pages 157-173, May.
    11. Helmuth Cremer & Jean-Marie Lozachmeur & Pierre Pestieau, 2012. "Income taxation of couples and the tax unit choice," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 763-778, January.
    12. Felix J. Bierbrauer & Pierre C. Boyer & Emanuel Hansen, 2023. "Pareto‐Improving Tax Reforms and the Earned Income Tax Credit," Econometrica, Econometric Society, vol. 91(3), pages 1077-1103, May.
    13. Kimmo Berg, 2013. "Complexity of solution structures in nonlinear pricing," Annals of Operations Research, Springer, vol. 206(1), pages 23-37, July.
    14. Joseph E. Stiglitz, 2004. "Information and the Change in the Paradigm in Economics, Part 2," The American Economist, Sage Publications, vol. 48(1), pages 17-49, March.
    15. Schroyen, Fred, 1997. "Pareto efficient income taxation under costly monitoring," Journal of Public Economics, Elsevier, vol. 65(3), pages 343-366, September.
    16. Craig Brett, 2007. "Optimal nonlinear taxes for families," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(3), pages 225-261, June.
    17. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    18. Henrik Jordahl & Luca Micheletto, 2005. "Optimal Utilitarian Taxation and Horizontal Equity," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(4), pages 681-708, October.
    19. Stiglitz, Joseph E., 2002. "New perspectives on public finance: recent achievements and future challenges," Journal of Public Economics, Elsevier, vol. 86(3), pages 341-360, December.
    20. Kokovin, S. & Nahata, B. & Zhelobodko, E., 2011. "All Solution Graphs in Multidimensional Screening," Journal of the New Economic Association, New Economic Association, issue 11, pages 10-38.
    21. Andersson, Tommy, 2004. "Essays on Nonlinear Pricing and Welfare," MPRA Paper 59446, University Library of Munich, Germany.
    22. Thomas Gaube, 2005. "Financing Public Goods with Income Taxation: Provision Rules vs. Provision Level," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(3), pages 319-334, May.
    23. Stefan Homburg, 2001. "The Optimal Income Tax: Restatement and Extensions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(4), pages 363-395, November.
    24. Yukihiro Nishimura, 2008. "Envy Minimization In The Optimal Tax Context," Working Paper 1178, Economics Department, Queen's University.
    25. Etro, Federico, 2017. "Research in economics and game theory. A 70th anniversary," Research in Economics, Elsevier, vol. 71(1), pages 1-7.

    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. Brito, Dagobert L. & Hamilton, Jonathan H. & Slutsky, Steven M. & Stiglitz, Joseph E., 1995. "Randomization in optimal income tax schedules," Journal of Public Economics, Elsevier, vol. 56(2), pages 189-223, February.
    2. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    3. Brito, Dagobert L. & Hamilton, Jonathan H. & Slutsky, Steven M. & Stiglitz, Joseph E., 1991. "Dynamic optimal income taxation with government commitment," Journal of Public Economics, Elsevier, vol. 44(1), pages 15-35, February.
    4. Morten Nyborg Støstad & Frank Cowell, 2021. "Inequality as an Externality: Consequences for Tax Design," PSE Working Papers halshs-03495989, HAL.
    5. Oztek, Abdullah Selim, 2019. "A Characterization for Marginal Income Tax Schedules," MPRA Paper 103046, University Library of Munich, Germany, revised 02 Dec 2019.
    6. Uwe Thuemmel, 2018. "Optimal Taxation of Robots," CESifo Working Paper Series 7317, CESifo.
    7. Stefan Homburg, 2001. "The Optimal Income Tax: Restatement and Extensions," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(4), pages 363-395, November.
    8. Slavík, Ctirad & Yazici, Hakki, 2014. "Machines, buildings, and optimal dynamic taxes," Journal of Monetary Economics, Elsevier, vol. 66(C), pages 47-61.
    9. Etro, Federico, 2016. "Research in economics and public finance," Research in Economics, Elsevier, vol. 70(1), pages 1-6.
    10. Amedeo Spadaro, 2002. "Redistribución e incentivos a la oferta de trabajo: Desarrollos recientes de la teoría de la imposición óptima sobre la renta," Hacienda Pública Española / Review of Public Economics, IEF, vol. 160(1), pages 147-173, march.
    11. Odd E. Nygård & John T. Revesz, 2015. "Optimal indirect taxation and the uniformity debate: A review of theoretical results and empirical contributions," Discussion Papers 809, Statistics Norway, Research Department.
    12. Bas Jacobs, 2013. "Optimal redistributive tax and education policies in general equilibrium," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(2), pages 312-337, April.
    13. Støstad, Morten Nyborg & Cowell, Frank, 2024. "Inequality as an externality: consequences for tax design," LSE Research Online Documents on Economics 123752, London School of Economics and Political Science, LSE Library.
    14. Blumkin, Tomer & Margalioth, Yoram & Sadka, Efraim, 2008. "Incorporating Affirmative Action into the Welfare State," Foerder Institute for Economic Research Working Papers 275709, Tel-Aviv University > Foerder Institute for Economic Research.
    15. Sören Blomquist & Vidar Christiansen & Luca Micheletto, 2010. "Public Provision of Private Goods and Nondistortionary Marginal Tax Rates," American Economic Journal: Economic Policy, American Economic Association, vol. 2(2), pages 1-27, May.
    16. Stiglitz, Joseph E., 2002. "New perspectives on public finance: recent achievements and future challenges," Journal of Public Economics, Elsevier, vol. 86(3), pages 341-360, December.
    17. Gauthier, Stéphane & Laroque, Guy, 2014. "On the value of randomization," Journal of Economic Theory, Elsevier, vol. 151(C), pages 493-507.
    18. Röser, Florian & Niemann, Stefan & Angelini, Daniele, 2023. "Fiscal Policy and Human Capital in the Race Against the Machine," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277672, Verein für Socialpolitik / German Economic Association.
    19. Lee, David & Saez, Emmanuel, 2012. "Optimal minimum wage policy in competitive labor markets," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 739-749.
    20. Laurent Simula & Alain Trannoy, 2023. "Bunching in rank-dependent optimal income tax schedules," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 60(1), pages 237-263, January.

    More about this item

    Statistics

    Access and download statistics

    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:nbr:nberwo:3288. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.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.