Viewpoint: Innovations in the theory and practice of redistribution policy

Viewpoint: Innovations in the theory and practice of redistribution policy

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Article ID: iaor201112000
Volume: 44
Issue: 4
Start Page Number: 1138
End Page Number: 1183
Publication Date: Nov 2011
Journal: Canadian Journal of Economics/Revue canadienne d'conomique
Authors:
Keywords: optimization, programming: nonlinear
Abstract:

We present a survey of key results from second‐best optimal redistribution theory and their implications for tax‐transfer policy. The core results include the Corlett‐Hague theorem, the Deaton conditions, the production‐efficiency theorem, the Atkinson‐Stiglitz theorem, and the Mirrlees‐Saez characterization of the optimal non‐linear income tax system. These have been augmented in recent years by optimal participation tax rates, the implications of involuntary unemployment, the use of unconventional instruments, such as minimum wages, in‐kind transfer, and workfare, and the optimal taxation of capital income and bequests.

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