In an analysis of a two-type income tax model with endogenous wages, this paper shows that production efficiency is violated in the optimum with (i) non-linear and (ii) linear income taxation if and only if a distortionary tax schedule is implemented. These findings complement earlier results of...

In this paper, a two-type, two-period model of optimum income taxation is investigated. I assume full commitment and that current income determines the agents' tax burden in each period. It is shown that such a tax system does not allow one to implement the optimal long-term tax contract and...

Due to the use of distortionary taxation, many believe that real-world economies should attain a lower level of public expenditures than one might suspect from the analysis of artificial models where lump-sum taxes are assumed to be available. The paper examines this popular hypothesis by means...

This paper deals with second-best pollution taxation by investigating allocations instead of the corresponding tax rates. Assuming certain restrictions on utility and that the marginal revenue from environmental taxation is positive, it is shown that environmental quality is higher in second...

Is it possible to replace the income tax by a consumption tax or a wage tax such that (1) a dynamic (intergenerational) Pareto improvement is obtained and (2) only the information available from enforcing the income tax is used? In this article, it is shown that such a transition is feasible if...