Optimal redistribution with unobservable disability:Welfarist versus non-welfarist social objectives
Date
2009
Authors
Pestieau, Pierre
Racionero, Maria
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Publisher
Elsevier
Abstract
This paper examines the optimal non-linear income and commodity tax when the same labor disutility can receive two alternative interpretations, taste for leisure or disability, but the disability is not readily observable. We compare the optimal policy under alternative social objectives, welfarist and non-welfarist, and conclude that the non-welfarist objective, in which the planner gives a higher weight to the disutility of labor of the disabled individuals, is the only reasonable specification. It has some foundation in the theory of responsibility; further, unlike the other specifications it yields an optimal solution that may involve a lower labor supply requirement from disabled individuals.
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Keywords
Keywords: asymmetric information; comparative study; disability; economic geography; income distribution; labor supply; tax system Asymmetric information; Optimal non-linear taxation; Quasi-linear preferences; Responsibility
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European Economic Review
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Journal article
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2037-12-31
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