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Inequality minimising subsidy and taxation

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Abstract

We address the problem of procuring a certain amount of tax from the individuals in a society together with allocating a specific quantity of subsidy to the same set of individuals in an inequality minimising manner, where the tax and subsidy sizes need not be the same. If the combined tax-subsidy schedule does not modify the aggregate income, then Fei’s (Econometrica 49:869–881, 1981) inequality minimising solution for a balanced budget plan becomes a particular case of our tax-subsidy program, considered in a more general and practical situation in which the subsidy and tax aggregates may not be equal.

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Acknowledgements

We thank the reviewer for comments which have helped in improving the paper. In particular, we thank the reviewer for drawing our attention to the proof of Proposition 1 in Bosmans and Lauwers (2011) which has helped in reducing the length of the proof of Theorem 1. We also thank an Associate Editor of the journal for a very helpful comment.

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Authors and Affiliations

  1. Indian Statistical Institute, 203, B.T. Road, Calcutta, 700108, India

    Satya R. Chakravarty & Palash Sarkar

  2. Indira Gandhi Institute of Development Research, Gen. A.K. Vaidya Marg, Filmcity Road, Goregaon (East), Mumbai, 400065, India

    Satya R. Chakravarty

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  1. Satya R. Chakravarty
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  2. Palash Sarkar
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Correspondence to Palash Sarkar.

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Chakravarty, S.R., Sarkar, P. Inequality minimising subsidy and taxation. Econ Theory Bull 10, 53–67 (2022). https://doi.org/10.1007/s40505-022-00218-2

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