Taxation and Tournaments
2002 (English)Report (Other academic)
This paper analyzes the effects of progressive taxes on labour supply and income distribution in the context of the rank-order tournament model originally developed by Lazear and Rosen (1981). We show conditions under which a more progressive tax schedule will cause so large general equilibrium effects that the inequality in disposable income will actually increase. We also show that a non-zero redistributive tax is always optimal if society’s welfare function displays inequality aversion; this result always holds, regardless of behavioral responses and general equilibrium effects.
Place, publisher, year, edition, pages
Stockholm: IIES , 2002. , 25 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University. (Online), ISSN 1653-610X ; 715
IdentifiersURN: urn:nbn:se:su:diva-42046OAI: oai:DiVA.org:su-42046DiVA: diva2:343785