Non-Leaky Buckets: Optimal Redistributive Taxation and Agency Costs / Karla Hoff, Andrew B. Lyon.

Format:

Book

Author/Creator:

Hoff, Karla.

Contributor:

National Bureau of Economic Research.

Lyon, Andrew B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4652.

NBER working paper series no. w4652

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Non-Leaky Buckets

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1994.

Summary:

Economists have generally argued that income redistribution comes at a cost in aggregate incomes. We provide a counter-example in a model where private information gives rise to incentive constraints. In the model, a wage tax creates the usual distortion in labor-leisure choices, but the grants that it finances reduce a distortion in investment in human capital. We prove that simple redistributive policies can yield Pareto improvements and increase aggregate incomes. Where higher education is beyond the reach of the poor, the wage tax- transfer policy is under most circumstances more effective than targeted credit taxes or subsidies in increasing over-all efficiency.

Notes:

Print version record

February 1994.