Non-Leaky Buckets: Optimal Redistributive Taxation and Agency Costs / Karla Hoff, Andrew B. Lyon.

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Hoff, Karla

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w4652.Publication details: Cambridge, Mass. National Bureau of Economic Research 1994.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Economists have generally argued that income redistribution comes at a cost in aggregate incomes. We provide a counter-example in a model where private information gives rise to incentive constraints. In the model, a wage tax creates the usual distortion in labor-leisure choices, but the grants that it finances reduce a distortion in investment in human capital. We prove that simple redistributive policies can yield Pareto improvements and increase aggregate incomes. Where higher education is beyond the reach of the poor, the wage tax- transfer policy is under most circumstances more effective than targeted credit taxes or subsidies in increasing over-all efficiency.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w4652 (Browse shelf(Opens below))	Not For Loan

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February 1994.

Economists have generally argued that income redistribution comes at a cost in aggregate incomes. We provide a counter-example in a model where private information gives rise to incentive constraints. In the model, a wage tax creates the usual distortion in labor-leisure choices, but the grants that it finances reduce a distortion in investment in human capital. We prove that simple redistributive policies can yield Pareto improvements and increase aggregate incomes. Where higher education is beyond the reach of the poor, the wage tax- transfer policy is under most circumstances more effective than targeted credit taxes or subsidies in increasing over-all efficiency.