Abstract
This paper explores the effect of personal income taxes on redistribution when labour supply reactions are taken into consideration. The results indicate that the classical non-behavioural results on redistribution are not necessarily satisfied in a more general behavioural framework. In this respect, it is shown that the relevant transition to measure redistribution is not the transition from the initial post-tax to the final post-tax income distribution, but rather from the more precise initial pre-tax to the final post-tax income distribution. In addition, the necessary and sufficient conditions to ensure redistribution in this wider setting are postulated, which helps determine the behavioural bias under alternative tax and labour supply models. This shows that the functional specification of labour supply may also affect the results.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Aaberge, R., Dagsvik, J. and Strøm, S.: Labor supply responses and welfare effects of tax reforms, Scandinavian Journal of Economics 97 (1995), 635–659.
Aaberge, R., Colombino, U. and Strøm, S.: Labor supply in Italy: An empirical analysis of joint household decisions, with taxes and quantity constraints, Journal of Applied Econometrics 14 (1999), 403–422.
Aaberge, R., Colombino, U. and Strøm, S.: Labor supply responses and welfare effects from replacing current tax rules by a flat tax: Empirical evidence from Italy, Norway and Sweden, Journal of Population Economics 13 (2000), 595–621.
Atkinson, A.B.: On the measurement of inequality, Journal of Economic Theory 2 (1970), 244–263.
Atkinson, A.B.: Public Economics in Action: Basic Income-Flat Tax Proposal, Clarendon Press, Oxford, 1995.
Atkinson, A.B. and Stiglitz, J.E.: Lectures on Public Economics, McGraw-Hill, Maidenhead, Berkshire, UK, 1980.
Burtless, G. and Hausman, J.A.: The effect of taxation on labour supply: Evaluating the Gary negative income tax experiment, Journal of Political Economy 86 (1978), 1103–1130.
Fellman, J.: The effects of transformations on Lorenz curves, Econometrica 44 (1976),869–881.
Hall, R.E. and Rabushka, A.: The Flat Tax, 2nd edn, Hoover Institution Press, Stanford, CA, 1995.
Hausman, J.A.: The effects on wages, taxes and fixed costs on women’s labour force participation, Journal of Public Economics 14 (1980), 161–194.
Hausman, J.A.: Labour supply, In: H.J. Aaron and J.A. Pechman (eds.), How Taxes Affect Economic Behaviour, Brookings, Washington, DC, 1981, 27–72.
Jakobsson, U.: On the measurement of the degree of progression, Journal of Public Economics 5 (1976), 161–168.
Kakwani, N.C.: Applications of Lorenz curves in economic analysis, Econometrica 45 (1977), 719–727.
Keen, M., Papapanagos, H. and Shorrocks, A.: Progressivity effects of structural income tax reforms, Economic Journal 100 (2000), 1–19.
Lambert, P.J.: The Distribution and Redistribution of Income, 3rd edn, Manchester University Press, Manchester, 2001.
Preston, I.P.: The redistributive effect of progressive taxation, with endogenous labour decisions, MPhil Thesis, Oxford University, unpublished, 1987.
Preston, I.P.: The redistributive effect of progressive taxation, DPhil Thesis, Oxford University, unpublished, 1989.
Stern, N.H.: On the specification of models of optimum income taxation, Journal of Public Economics 6 (1976), 123–162.
Zabalza, A.: The CES utility function, non-linear budget constraints and labour supply. Results on female participation and hours, Economic Journal 93 (1983), 312–330.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Onrubia, J., Salas, R. & Sanz, J.F. Redistribution and labour supply. J Econ Inequal 3, 109–124 (2005). https://doi.org/10.1007/s10888-005-1087-6
Received:
Accepted:
Issue Date:
DOI: https://doi.org/10.1007/s10888-005-1087-6