Poverty Alleviation and Tax Policy

European Economic Review 48, 1075-1090,10/2004; DOI: 10.1016/j.euroecorev.2004.01.003

Posted: 6 Sep 2014

See all articles by Jukka Pirttila

Jukka Pirttila

United Nations - World Institute for Development Economics Research (UNU/WIDER); Tampere University of Technology

Date Written: October 1, 2004

Abstract

This paper examines public good provision and tax policy — optimal non-linear income taxation and linear commodity taxation — when the government departs from purely welfarist objective function and seeks to minimise poverty. This assumption reflects much policy discussion and may help understand some divergences of practical tax policy from lessons in optimal tax analysis. In contrast to Atkinson and Stiglitz (J. Public Econom. 6 (1976) 55), it may be optimal to use differentiated commodity tax rates, including the taxation of savings, even if preferences are separable in goods and leisure. The optimal effective marginal tax rate at the bottom of the distribution may be negative, suggesting that wage subsidy schemes can be optimal. Finally, optimal provision of a public good is analysed under poverty minimisation.

Suggested Citation

Pirttila, Jukka, Poverty Alleviation and Tax Policy (October 1, 2004). European Economic Review 48, 1075-1090,10/2004; DOI: 10.1016/j.euroecorev.2004.01.003 . Available at SSRN: https://ssrn.com/abstract=2491810

Jukka Pirttila (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6B
Helsinki, FIN-00160
Finland

Tampere University of Technology ( email )

P.O. 541, Korkeakoulunkatu 8 (Festia building)
Tampere, FI-33101
Finland

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