Josheski, Dushko and Boskov, Tatjana (2019) Optimal taxation in theory. Public Economics: Taxation, Subsidies, & Revenue eJournal Vol 14, Issue 42, June 19, 2019 , 14 (42).
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Abstract
In this paper optimal income taxation theories are subject of investigation following the classic paper
in public finance by Mirrlees (1971), than the models of Sadka (1976), Seade,(1977), Akerlof
(1978),Stiglitz (1982), Diamond (1998), and Saez (2001) , Piketty-Saez-Stantcheva (2014), all related to
the classic paper by Mirrlees (1971). The problem is to maximize integral over population of the social
evaluation of individual utility, that depends on individual consumption and labor. This paper first
posed the problem of asymmetric information since the basic idea of the paper is that a first-best
redistribution scheme is based on innate ability, and the information about ability is known to the
individual, the government observes instead earnings. Mirrlees (1971), provides analytical solutions
for the second-best efficient tax system in presence of such an adverse selection. Untill late 1990s,
Mirrlees results not closely connected to empirical tax studies and little impact on tax policy
recommendations Since late 1990s, Diamond (1998), Saez (2001) have connected Mirrlees model to
practical tax policy / empirical tax studies. Mankiw, Weinzierl, and Yagan (2009) provide MATLAB code
for analyzing the Mirrlees model MTR and wages, they are using log-normal and Pareto distributions.
Later we look up to theory for optimal commodity sales taxes Ramsey (1927),using Ramsey rule
utilized in Feldstein (1978) also , Diamond-Mirrlees (1971a), Diamond-Mirrlees (1971b) propose
alternative to Ramsey proposition.
| Item Type: | Article |
|---|---|
| Subjects: | Social Sciences > Economics and business |
| Divisions: | Faculty of Tourism and Business Logistics |
| Depositing User: | Dusko Josevski |
| Date Deposited: | 20 Jun 2019 10:08 |
| Last Modified: | 20 Jun 2019 10:08 |
| URI: | https://eprints.ugd.edu.mk/id/eprint/22166 |
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