Optimal Tax-Transfer Systems and Redistributive Policy |
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| Authors: | Johan Fellman,Markus Jä ntti,& Peter J. Lambert |
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| Affiliation: | Swedish School of Economics and Business Administration, FIN-00101 Helsinki, Finland,;Åbo Akademi University, FIN-20500 Åbo, Finland,;University of York, Heslington YO1 5DD, England |
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| Abstract: | In this paper we develop "optimal yardsticks" to gauge the effectiveness of given tax and benefit policies in reducing inequality. We show that the conjunction of the optimal tax and optimal benefits policies constitutes the optimal tax-and-benefit policy, given the tax and benefit budget sizes. A decomposition formula enables trends in the inequality impact of taxes and benefits to be explained in terms of changing policy effectivess (targeting) and budget size effects. The analysis incorporates a distributional judgement parameter, for sensitivity analysis, and concludes with an examination of the Finnish case for the period 1971–1990.
JEL Classification : D 63 |
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| Keywords: | Income tax benefits inequality |
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