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Inequality Aversion, Externalities, and Pareto-Efficient Income taxation


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Title: Inequality Aversion, Externalities, and Pareto-Efficient Income taxation
Authors: Aronsson, Thomas
Johansson-Stenman, Olof
Issue Date: May-2020
Extent: 44
Publication type: report
Organization: Department of Economics, University of Gothenburg
Series/Report no.: Working Papers in Economics
785
Keywords: Pareto-efficient taxation
Inequality aversion
Self-centered inequality aversion
Non-self-centered inequality aversion
Fehr and Schmidt preferences
Bolton and Ockenfels preferences
GINI coefficient
Coefficient of variation
Abstract: Abstract This paper analyzes Pareto-efficient marginal income taxation taking into account externalities induced through individual inequality aversion, meaning that people have preferences for equality. In doing so, we distinguish between four different and widely used models of inequality aversion. The results show that empirically and experimentally quantified degrees of inequality aversion have potentially very strong implications for Pareto-efficient marginal income taxation. It also turns... more
ISSN: 1403-2465
Description: JEL Classification: D03, D62, H23.
URI: http://hdl.handle.net/2077/64460
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