Optimal Redistribution with Endogenous Social Norms |
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Authors: | Robin W Boadway Nicolas‐Guillaume Martineau |
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Institution: | 1. Queen's University, Kingston ON K7L 3N6, Canada;2. Glendon College, York University, Toronto ON M4N 3M6, Canada |
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Abstract: | In this paper, we examine the effect of social norms on redistributive policies, where social norms are reflected in the degree of work participation among the different skill classes. Participation is driven both by the material incentives and heterogeneous preferences for leisure of each skill class, and by an endogenous social norm. Results for optimal redistributive taxation show that when the social norm enters as a benefit or cost for participants, participation taxes are generally lower than in its absence. Multiple participation equilibria can occur, and an engineered shift from a low‐ to a high‐participation equilibrium can be Pareto‐improving in the long run. |
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Keywords: | Distributive justice optimal taxation work participation D63 H21 |
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