Should the Marginal Tax Rate Be Negative? Ragnar Frisch on the Socially Optimal Amount of Work

39 Pages Posted: 27 Jan 2017

See all articles by Agnar Sandmo

Agnar Sandmo

Norwegian School of Economics (NHH); Norwegian School of Economics (NHH) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 25, 2017

Abstract

In the late 1940s, Ragnar Frisch published two articles in Norwegian that constitute a pioneering attempt to apply welfare economics to a problem of economic policy. The main contention of the articles is that there exists a fundamental externality in the labour market because the marginal productivity of labour depends both on input in the individual unit and on total labour use in the economy. While inspired by the problems of post‐war reconstruction, Frisch came to regard it as a general problem in a decentralized economy, and he explores its consequences for wage and tax policy. While Frisch attached great importance to the analysis, it has received little attention in the subsequent literature.

Suggested Citation

Sandmo, Agnar, Should the Marginal Tax Rate Be Negative? Ragnar Frisch on the Socially Optimal Amount of Work (January 25, 2017). NHH Dept. of Economics Discussion Paper No. 1/2017. Available at SSRN: https://ssrn.com/abstract=2906743 or http://dx.doi.org/10.2139/ssrn.2906743

Agnar Sandmo (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 55 95 92 76 (Phone)

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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