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dc.contributor.authorKanbur, Ravi
dc.contributor.authorPirttila, Jukka
dc.contributor.authorTuomala, Matti
dc.date.accessioned2018-08-21T17:09:17Z
dc.date.available2018-08-21T17:09:17Z
dc.date.issued2004-04
dc.identifier.urihttps://hdl.handle.net/1813/57732
dc.descriptionWP 2004-04 April 2004
dc.descriptionJEL Classification Codes: D81; H21
dc.description.abstractThe standard theory of optimal income taxation under uncertainty has been developed under the assumption that individuals maximize expected utility. However, prospect theory has now been established as an alternative model of individual behavior, with empirical support. This paper explores the theory of optimal income taxation under uncertainty when individuals behave according to the tenets of prospect theory. It is seen that many of the standard results are either overturned, or modified in interesting ways. The validity of the First Order Approach requires new conditions that are developed in the paper. And when these conditions are valid, it is shown that optimal marginal tax rates on low incomes will tend to be lower under prospect theory than under expected utility theory.
dc.language.isoen_US
dc.publisherCharles H. Dyson School of Applied Economics and Management, Cornell University
dc.titleMoral Hazard, Income Taxation, and Prospect Theory
dc.typearticle
dcterms.licensehttp://hdl.handle.net/1813/57595


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  • Dyson School Working Papers
    Working Papers published by the Charles H. Dyson School of Applied Economics and Management, Cornell University

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