Using the standard non linear income and commodity taxation framework, we examine the optimal policy to be adopted when the same labour disutility can receive two opposite interpretations: taste for leisure and activity limitation. In the absence of complete information about individual...

This paper examines the optimal non linear income and commodity tax when the same labor disutility can receive two alternative interpretations, taste for leisure and disability, but the disability is not readily observable. We compare the optimal policy under alternative social objectives,...