Understanding the Evolution of Inequality During Transition: The Optimal Income Taxation
| dc.contributor.author | Kanbur, Ravi | |
| dc.contributor.author | Tuomala, Matti | |
| dc.date.accessioned | 2018-08-21T17:11:12Z | |
| dc.date.available | 2018-08-21T17:11:12Z | |
| dc.date.issued | 2002-04 | |
| dc.description | WP 2002-10 April 2002 | |
| dc.description.abstract | What explains the spectacular increases in inequality of disposable income in transitional economies of Central and Eastern Europe? There are at least two possible explanations. First, the pre-tax distribution of income became more unequal because of the shift to a market economy. Second, the degree of progressivity of the income tax system declined. But each of these factors is in turn determined by other structural changes associated with transition-notably, the decrease in public provision of key public goods, the decrease in non income tax revenue sources such as profits from public production, and perhaps a decline in society's inequality aversion. This paper develops a framework in which these different forces on inequality can be assessed. Using a simple two-type and two-sector optimal income tax model with endogenous wages, we first of all show that a decrease in the provision of public goods could indeed lead to increasing inherent inequality, in other words inequality in market incomes. It then deploys the Mirrlees model of optimal non- linear taxation to assess the relative impacts of this increase in inherent inequality, the decreasing sources of non income tax revenue, and possible declines in inequality aversion; to get a numerical feel for their possible impacts on inequality. | |
| dc.identifier.uri | https://hdl.handle.net/1813/58071 | |
| dc.language.iso | en_US | |
| dc.publisher | Charles H. Dyson School of Applied Economics and Management, Cornell University | |
| dc.title | Understanding the Evolution of Inequality During Transition: The Optimal Income Taxation | |
| dc.type | article | |
| dcterms.license | http://hdl.handle.net/1813/57595 |
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