Department of Economics and Business Economics

An interpretation of the Gini coefficient in a Stiglitz two-type optimal tax problem

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An interpretation of the Gini coefficient in a Stiglitz two-type optimal tax problem. / Rasmussen, Bo Sandemann.

In: Journal of Economic Inequality, Vol. 13, No. 1, 2015, p. 17-26.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

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Rasmussen, BS 2015, 'An interpretation of the Gini coefficient in a Stiglitz two-type optimal tax problem', Journal of Economic Inequality, vol. 13, no. 1, pp. 17-26.

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Rasmussen, Bo Sandemann. / An interpretation of the Gini coefficient in a Stiglitz two-type optimal tax problem. In: Journal of Economic Inequality. 2015 ; Vol. 13, No. 1. pp. 17-26.

Bibtex

@article{f56eb609fc774dd4b9dab412580e279d,
title = "An interpretation of the Gini coefficient in a Stiglitz two-type optimal tax problem",
abstract = "In a two-type Stiglitz (1982) model of optimal non-linear taxation it is shown that when the utility function relating to consumption is logaritmic the shadow price of the incentive constraint relating to the optimal tax problem exactly equals the Gini coefficient of the second-best optimal income distribution of a utilitarian government. In this sense the optimal degree of income redistribution is determined by the severity of the incentive problem facing the policy-maker. Extensions of the benchmark model to allow for more general functional forms of the utility function and for more than two types of workers reveal that also in these cases the desired degree of income redistribution is positively correlated with the shadow prices of the incentive constraints.",
keywords = "Optimal taxation, Income distribution, Incentive constraint, Gini coefficient",
author = "Rasmussen, {Bo Sandemann}",
note = "DOI: 10.1007/s10888-014-9292-9",
year = "2015",
language = "English",
volume = "13",
pages = "17--26",
journal = "Journal of Economic Inequality",
issn = "1569-1721",
publisher = "Springer Link",
number = "1",

}

RIS

TY - JOUR

T1 - An interpretation of the Gini coefficient in a Stiglitz two-type optimal tax problem

AU - Rasmussen, Bo Sandemann

N1 - DOI: 10.1007/s10888-014-9292-9

PY - 2015

Y1 - 2015

N2 - In a two-type Stiglitz (1982) model of optimal non-linear taxation it is shown that when the utility function relating to consumption is logaritmic the shadow price of the incentive constraint relating to the optimal tax problem exactly equals the Gini coefficient of the second-best optimal income distribution of a utilitarian government. In this sense the optimal degree of income redistribution is determined by the severity of the incentive problem facing the policy-maker. Extensions of the benchmark model to allow for more general functional forms of the utility function and for more than two types of workers reveal that also in these cases the desired degree of income redistribution is positively correlated with the shadow prices of the incentive constraints.

AB - In a two-type Stiglitz (1982) model of optimal non-linear taxation it is shown that when the utility function relating to consumption is logaritmic the shadow price of the incentive constraint relating to the optimal tax problem exactly equals the Gini coefficient of the second-best optimal income distribution of a utilitarian government. In this sense the optimal degree of income redistribution is determined by the severity of the incentive problem facing the policy-maker. Extensions of the benchmark model to allow for more general functional forms of the utility function and for more than two types of workers reveal that also in these cases the desired degree of income redistribution is positively correlated with the shadow prices of the incentive constraints.

KW - Optimal taxation

KW - Income distribution

KW - Incentive constraint

KW - Gini coefficient

M3 - Journal article

VL - 13

SP - 17

EP - 26

JO - Journal of Economic Inequality

JF - Journal of Economic Inequality

SN - 1569-1721

IS - 1

ER -