Poverty alleviation and tax policy

This paper examines public good provision and tax policy—optimal non-linear income taxation and linear commodity taxation—when the government departs from purely welfarist objective function and seeks to minimise poverty. This assumption reflects much policy discussion and may help understand some divergences of practical tax policy from lessons in optimal tax analysis. In contrast to Atkinson and Stiglitz (J. Public Econom. 6 (1976) 55), it may be optimal to use differentiated commodity tax rates, including the taxation of savings, even if preferences are separable in goods and leisure. The optimal effective marginal tax rate at the bottom of the distribution may be negative, suggesting that wage subsidy schemes can be optimal. Finally, optimal provision of a public good is analysed under poverty minimisation.     

Public investment criteria under optimal nonlinear income taxation without commitment

In this study, we highlight that the incredibility of the government's commitment to a certain tax policy is a determinant of production inefficiency. We show that if the government cannot commit to a certain tax policy and if the types of taxpayers are completely separated, then the production efficiency theorem could be violated in an optimal solution. In this case, an incremental unit of public or private capital affects taxpayers' labor supply through wage rates. In a situation where public capital is more (less) complementary to labor than private capital, public investment tightens (relaxes) the incentive compatibility constraint more than private investment.     

Optimal time-consistent fiscal policy under endogenous growth with elastic labor supply

We explore the implications of incorporating an elastic labor supply in an endogenous growth economy when characterizing the time-consistent Markov policy. We consider two policy instruments: an income tax rate and the split of government spending between consumption and production services. The Markov-perfect policy implies a higher income tax rate and a larger proportion of government spending allocated to consumption than those chosen under a commitment constraint on the part of the government. As a consequence, economic growth is slightly lower under the Markov-perfect policy than under the Ramsey policy. Under the Markov and Ramsey optimal policies, a higher weight of leisure in households' preferences leads to a lower optimal income tax rate and a lower proportion of public resources devoted to consumption. We also show that the policy bias that would arise when imposing a Markov policy designed ignoring the presence of leisure in the utility function would lead to a significant welfare loss.     

Are income and consumption taxes ever really equivalent? Evidence from a real-effort experiment with real goods

The public finance literature demonstrates the equivalence between consumption and labor-income (wage) taxes. We introduce an experimental paradigm in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this paradigm to test whether a labor-income tax and an equivalent consumption tax lead to identical labor-leisure allocations. Despite controlling for subjects' work ability and inherent labor-leisure preferences and disallowing saving, subjects reduce their labor supply significantly more in response to an income tax than to an equivalent consumption tax. We discuss the economic implications of a policy shift to a consumption tax.     

Optimal Design of Forest Taxation with Multiple-Use Characteristics of Forest Stands

The paper studies optimal forest taxation under uncertainty about future timber price when private forest owners value amenity services of forest stands and forest stands have public goods characteristics. It is assumed that preferences of forest owners can be described by a quasi-linear, intertemporal utility function which reflects risk aversion in terms of consumption and constant marginal utility in terms of amenity services. The comparative statics of current and future harvesting in terms of timber price risk, site productivity tax and yield tax are first developed. It is shown that, given the optimal site productivity tax, which is independent of the timber harvested and thus non-distortionary, it is desirable to introduce the yield tax at the margin; it both corrects externality due to the public goods characteristic of forest stands and serves as a social insurance device. The optimal yield tax is less than 100% and depends on the social value of forest stands, timber price risk and properties of compensated timber supply. In the general case the 'inverse elasticity rule – according to which the optimal yield tax is negatively related to the size of the substitution effects – may not hold. Under certainty, the desirability of the yield tax, given the optimal site productivity tax, depends only on the existence of public goods characteristic and is thus a pure Pigouvian tax.     

PUBLIC GOOD PROVISION AND THE COMPARATIVE STATICS OF OPTIMAL NONLINEAR INCOME TAXATION*

Comparative static properties of the solution to an optimal nonlinear income tax problem are provided for a model in which the government both designs an income tax schedule for redistributive purposes and provides a public good optimally. There are two types of individuals, distinguished by their skill levels, who have the same quasilinear preferences for labor supply and the consumption of a private and a public good. Comparative statics are obtained for the weights in a weighted utilitarian social welfare function, the prices of the two goods, a taste parameter that measures the onerousness of working, and the skill levels.     

Optimal labor income taxation in a two-sector dynamic general equilibrium model

This paper presents a new approach to the two-sector optimal taxation problem. We derive the optimal labor income tax rate which depends on factor intensity across sectors. It is the labor intensity that determines the initial wage rate, and therefore the optimal labor tax rate. We show that an increase in the initial relative price of consumption goods decreases the optimal tax rate on labor income in the case that the consumption goods sector is capital-intensive while it increases the optimal tax rate on labor income in the case that the investment goods sector is capital-intensive.     

Direct Versus Indirect Taxation: The Design of the Tax Structure Revisited

This article studies the optimal direct/indirect tax mix problem when individuals differ in several unobservable characteristics (productivity and endowments). It presents general expressions for the optimal commodity tax rates and proves that contrary to Atkinson and Stiglitz's (1976) result, differential commodity taxation remains a useful instrument of tax policy even if preferences are separable between labor and produced goods. When cross substitution effects are zero, the expressions resemble traditional many households Ramsey rules. In a Cobb–Douglas illustration, where endowments differ only in good 1 (interpreted as “wealth”), the tax on good 2 provides an indirect way to tax the unobservable wealth.     

Labor supply,uncertainty, and efficient taxation

We analyze the structure of an optimal linear income tax when workers are uncertain about their wages at the time they choose their labor supplies. Background for the normative analysis is provided by an outline of the positive theory of wage taxation and labor supply under uncertainty. It is then shown that given imperfect information about wages, lump-sum taxation is not necessarily efficient. Because a wage tax reduces the riskiness of wage income, some combination of a lump-sum tax and a wage tax generally will minimize excess burden.     

The impact of targeting policy on spouses’ demand for public goods,labor supplies and sharing rule

This paper studies the impact of targeted unconditional cash transfers on the spouses’ demand for public goods, labor supplies and sharing of resources. We estimate a collective labor supply model with distributional factors which is extended to include preferences over marketable public goods (including child goods). In this way, unlike previous research, we consider the impact of such transfers on the intrahousehold allocation of resources and distinguish between the labeling and recipient effects. We exploit the UK experience and find evidence in favor of the collective model with separable preferences over labor supplies and public goods. This finding implies a recipient effect and not a labeling effect of child benefits. Given the household’s unearned income, the bigger the wife’s bargaining power, the more the resources allocated to public goods (including child goods) and the wife’s private consumption. The results can be useful in the design of family policy which aims to improve the relative welfare of children within the family and alleviate any intrahousehold consumption inequalities.     

Taxation,insurance, and precautionary labor

We examine optimal taxation and social insurance with adverse selection in competitive insurance markets. In a previous literature, it has been shown that, with perfect insurance markets, social insurance improves welfare since it is able to redistribute without creating distortions. This result has been taken as robust to the introduction of adverse selection as this would only provide additional justifications for social insurance. We show, however, that adverse selection can weaken the case for social insurance compared to a situation with perfect markets. Whenever social insurance mitigates private underinsurance, it also causes welfare-reducing effects by decreasing precautionary labor supply and hence tax revenue. In addition, adverse selection may reduce the redistributive potential of social insurance. We illustrate our general results using different equilibrium concepts for the insurance market. Notably, we derive conditions under which a complete renunciation of social insurance is optimal and the government only relies on income taxation to achieve its redistributive objectives.     

Labor markets and mating markets: Using taxes to reduce the male–female pay gap

Recently, Frank and McKenzie (J Bioecon 8(3):269–274, 2006) pointed out that beside discrimination, there is a further reason for a wage gap between males and females: If females value partner wages more than males in the mating market, this would increase the pay gap. In this paper, it is analyzed whether there exist policies that may improve the position of females and males from a distributional point of view without destroying the signal females want about the labor market success of males. First-best redistribution policies require the knowledge of the male and female wage preferences. Because this information is not available, a first-best redistribution policy seems infeasible. As an alternative policy, a differentiated wage tax is considered which is less information demanding than a first-best policy. It is shown that a welfare increasing wage tax scheme does exist and that an adequately chosen wage tax scheme may decrease the gender wage gap without destroying the desired signal of wages for labor market success.     

Capital tax,minimum wage,and labor market outcomes

Often an increase in the minimum wage is accompanied by a reduction in the capital tax. This paper analyzes the effects of interactions between the minimum wage and the capital tax in the general equilibrium framework. The analysis is conducted in an inter-temporal search model in which firms post wages. A (binding) minimum wage provides a lower support for the distribution of wages. The paper finds that the interaction of these two policy instruments significantly modify labor market outcomes and welfare cost. In the presence of a binding minimum wage, a decrease in the capital tax leads to an increase in wage dispersion. In contrast, when it is not binding, a lower capital tax may reduce the dispersion in wages. A binding minimum wage magnifies the positive effects of a lower capital tax on labor supply, employment, and output. It also enhances the welfare cost of capital tax. A policy change which involves an increase in the minimum wage and a fall in the capital tax such that employment level remains constant increases welfare and output.     

Optimal tax treatment of private contributions for public goods with and without warm glow preferences

Tax-favored contributions for financing some public goods may be a useful part of optimal nonlinear income tax and expenditure policy. There are two sides to the potential gain from subsidized donations. First, for a given level of public good provision, higher private donations from high earners than low earners eases the incentive compatibility constraint for donors and so can raise social welfare. This follows since considering a lower-paid job includes a perception of a drop in public good provision. Second, private donation reduces consumption, easing the resource constraint. This paper explores optimal policy, using first a model with standard preferences and then a model with a warm glow of giving. In addition to showing the conditions for the level of public goods, the paper considers the pattern of optimal subsidization across earnings levels. Analysis of optimal taxation with warm glow preferences is sensitive to the choice of preferences that are relevant for a social welfare evaluation. After considering optimal rules with formulations of social welfare which do and do not include warm glow utility, the paper considers the choice of normative criterion. Like the earlier literature, this paper assumes that organizing private donations is costless while tax collection has a deadweight burden. Since private charitable fundraising is very far from costless, the paper is an exploration of economic mechanisms, not a direct guide to policy.     

The Time‐Consistent Public Goods Provision

In this study, we reconsider the optimal nonlinear tax problem with the public good from the perspective of the commitment issue and examine how it affects the condition of the public good provision. We show that the Samuelson rule should be modified when the government cannot commit and the skill types of taxpayers are revealed in the first period. This is true even if the preference of the taxpayers is separable and additive with respect to consumption and leisure. Our analysis also shows how the lack of commitment affects the formula of the marginal cost of public funds and the level of public good provision. Our findings imply that the level of the public good may be excessive in comparison to the case where the government can commit to its tax policy.     

Intergenerational Allocation of Government Expenditures: Externalities and Optimal Taxation

This paper studies optimal capital and labor income taxes when the benefits of public goods are age‐dependent. Provided the government can impose a consumption tax, it can attain the first‐best resource allocation. This involves the uniform taxation of the cohorts' labor income and a zero capital income tax. With no consumption tax and optimally chosen government spending, labor income should be taxed nonuniformly across cohorts and the capital income tax should be nonzero. Deviations of the public goods from their respective optima create distortions. These affect the labor supply decisions of both cohorts and capital accumulation, providing a further reason to tax (or subsidize) capital income.     

Optimal democratic mechanisms for taxation and public good provision

We study the interdependence of optimal tax and expenditure policies. An optimal policy requires that information on preferences is made available. We first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on public good provision face an own incentive scheme that differs from the tax system. We then study democratic mechanisms with the property that tax payers vote over public goods. Under such a mechanism, efficiency cannot be reached and welfare from public good provision declines as the inequality between rich and poor individuals increases.     

产业内贸易对中国技能 工资差距的影响

本文试图考察产业内贸易对技能工资差距的影响,理论分析表明：它随劳动力条件的变化而变化,在劳动力无限供给条件下它取决于技术劳动力的绝对需求,由于产业内贸易必能刺激技术劳动力的绝对需求,因此必然会扩大工资差距。但在劳动力条件转向有限供给后,它又取决于技术劳动力的相对需求,而产业内贸易未必使之扩大,特别是对两类劳动力替代弹性较大的部门来说,可能会使技术劳动力的相对需求下降,并使技能工资差距收缩。本文基于中国33个产业的5年面板数据验证了上述假说。     

Why is the public sector more labor-intensive? A distortionary tax argument

Government-run entities are often more labor-intensive than private companies, even with identical production technologies. This need not imply slack in the public sector, but may reflect a wage tax advantage, stemming from the fact that government entities (partly) pay their taxes to themselves. A tax-induced cost advantage of public production precludes production efficiency and reduces welfare when labor supply is inelastic. With an elastic labor supply, a wage tax advantage of the public sector may improve welfare if it allows for a higher net wage.      

大力发展农村合作组织 提高农村公共物品供给能力

随着农业税的取消,作为农村公共物品主要供给者的乡(镇)、村两级组织的收入大大减少,极大地影响了公共物品供给,严重制约了我国农村经济的发展和农民社会福祉的提高,成为构建社会主义新农村的一大瓶颈。文章认为,在新形势下,应充分认识到农村合作组织对缓解农村公共物品供给不足问题的重要作用,及时调整农村公共事业发展的思路,通过配套政策支持,大力发展农村合作组织,提高农村公共物品供给能力,以适应农村公共事业发展的需要。