Well-Being, Poverty and Labor Income Taxation: Theory and Application to Europe and the U.S

30 Pages Posted: 6 Sep 2016

See all articles by Francois Maniquet

Francois Maniquet

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Dirk Neumann

University of Cologne

Abstract

In a model in which agents differ in wages and preferences over labor time-consumption bundles, we study labor income tax schemes that alleviate poverty. To avoid conflict with individual well-being, we require redistribution to take place between agents on both sides of the poverty line provided they have the same labor time. This requirement is combined with efficiency and robustness properties. Maximizing the resulting social preferences under incentive compatibility constraints yields the following evaluation criterion: tax schemes should minimize the labor time required to reach the poverty line. We apply this criterion to European countries and the US.

Keywords: well-being, poverty, labor income taxation

JEL Classification: D63, H21, I32

Suggested Citation

Maniquet, Francois and Neumann, Dirk, Well-Being, Poverty and Labor Income Taxation: Theory and Application to Europe and the U.S. IZA Discussion Paper No. 10181. Available at SSRN: https://ssrn.com/abstract=2834231

Francois Maniquet

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
+32 10 474328 (Phone)
+32 10 474301 (Fax)

HOME PAGE: http://www.core.ucl.ac.be/staff/maniquetcore.htm

Dirk Neumann (Contact Author)

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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