Using a calibrated overlapping generations model we quantify the welfare gains of an age dependent income tax. Agents face uncertainty regarding future abilities and can by saving transfer consumption across periods. The welfare gain of switching from an age-independent to an age-dependent...

This paper examines optimal redistribution in a model with high- and low-skilled individuals with heterogeneous tastes for labor. We compare the extent to which optimal policies based on different normative criteria obey the principles of compensation (for differential skills) and responsibility...

Whether observed differences in redistributive policies across countries are the result of differences in social preferences or efficiency constraints is an important question that paves the debate about the optimality of welfare regimes. To shed new light on this question, we estimate labor...

We solve the non-linear income tax program for a rank-dependent social welfare function à la Yaari, expressing the trade-off between size and inequality using the Gini or related families of positional indices. The key idea is that when agents optimize and absent bunching, ranks in the actual...

We show how normative standpoints determine optimal taxation of wealth. Since wealth is not equal to capital, we find very different welfare implications of land rent-, bequest- and capital taxation. It is mainly land rents that should be taxed. We develop an overlapping generations model with...

We propose and axiomatically characterize a family of welfare criteria that prioritize individuals making larger sacrifices. By combining efficiency with a concern for equality of sacrifice, our criteria avoid serious shortcomings of utilitarianism. We illustrate our results within the...

We offer a new explanation for why taxes have become less progressive in many countries in parallel with an increase in income inequality. When performance-based compensation differentials are needed to incentivize effort, redistribution through progressive income taxes becomes less precisely...

We consider optimal non-linear income tax problems when the social welfare function only depends on ranks as in Yaari (1987) and weights agree with the Lorenz quasi-ordering. Gini, S-Gini, and a class putting more emphasis on inequality in the upper part of the distribution belong to this set....

The recent public economics literature involves an apparent consensus that income effects reduce the costs of raising revenues and hence increase the desirable level of public good provision. Higher taxes can indeed reduce the demand for leisure -- and hence increase the supply of taxed labor --...