De Gustibus non est Taxandum: Heterogeneity in Preferences and Optimal Redistribution

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De Gustibus non est Taxandum: Heterogeneity in Preferences and Optimal Redistribution

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Title: De Gustibus non est Taxandum: Heterogeneity in Preferences and Optimal Redistribution
Author: Lockwood, Benjamin B; Weinzierl, Matthew Charles

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Citation: Lockwood, Benjamin B., and Matthew Weinzierl. "De Gustibus non est Taxandum: Heterogeneity in Preferences and Optimal Redistribution." Journal of Public Economics 124 (April 2015): 74–80.
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Abstract: The prominent but unproven intuition that preference heterogeneity reduces redistribution in a standard optimal tax model is shown to hold under the plausible condition that the distribution of preferences for consumption relative to leisure rises, in terms of first-order stochastic dominance, with income. Given familiar functional form assumptions on utility and the distributions of ability and preferences, a simple statistic for the effect of preference heterogeneity on marginal tax rates is derived. Numerical simulations and suggestive empirical evidence demonstrate the link between this potentially measurable statistic and the quantitative implications of preference heterogeneity for policy.
Published Version: http://www.sciencedirect.com/science/article/pii/S0047272715000134
Terms of Use: This article is made available under the terms and conditions applicable to Open Access Policy Articles, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#OAP
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:16388194
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