This paper investigates second-best (transfers in kind) and third-best (subsidies and taxes) Pare to optima in a simple model were government lacks full information ab out consumer types (who is able, who is infirm). These Pareto optima rely on self-selection. The authors show that those...

This paper explores how to optimally set taxes and transfers when taxation authorities are uninformed about individuals' value of time in both market and nonmarket activities; and can observe both market-income and time allocated to market employment. We show that optimal redistribution in this...