Affiliation:
1. Toulouse School of Economics (University of Toulouse and Institut universitaire de France).
2. Department of Economics, University of Illinois at Urbana-Champaign.
3. Toulouse School of Economics (CNRS).
Abstract
We derive a set of analytical results for optimal income taxation with tags using quasilinear preferences and a Rawlsian social welfare function. Secondly, assuming a constant elasticity of labor supply and log-normality of the skills distribution, we analytically identify the winners and losers of tagging. Third, we prove that if the skills distribution in one group first-order stochastically dominates the other, tagging calls for redistribution from the former to the latter group. Finally, we calibrate our model to the US workers using gender as tag. Welfare implications are dramatic. Only male high-wage earners lose. Everyone else gains, some substantially. (JEL H21, H23, H24)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
32 articles.
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