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Optimal Redistributive Taxation$
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Matti Tuomala

Print publication date: 2016

Print ISBN-13: 9780198753414

Published to Oxford Scholarship Online: March 2016

DOI: 10.1093/acprof:oso/9780198753414.001.0001

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Heterogeneous work preferences and optimal redistribution

Heterogeneous work preferences and optimal redistribution

(p.249) 10 Heterogeneous work preferences and optimal redistribution
Optimal Redistributive Taxation

Matti Tuomala

Oxford University Press

Chapter 10 considers optimal redistribution when individuals differ not only in productivity but also in working preferences. Although the models of the one-dimensional population have been useful for computations and examinations of the optimal income tax/transfer problem, they are not in all respects accurate pictures of reality. To analyse redistribution policies more fully, it would be useful to consider situations where individuals are characterized by more than just one parameter. The problem of heterogeneous preferences is not just about incentives. It is also normative, because the social objective must then involve interpersonal comparisons of individuals with diverse preferences. In the welfarist tradition of welfare economics, there is no principle on which such comparisons can be grounded. This tradition always assumes that the relevant utility functions are provided by some impartial authority. When heterogeneity emanates from preferences, comparison of the groups with different utilities is no longer clear.

Keywords:   two-dimensional, heterogeneity of preferences, responsibility, equal opportunity, redistribution

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