Redistributive taxation and social insurance

✍ Scribed by Cremer, Helmuth; Pestieau, Pierre

• Book ID: 104767737
• Publisher: Springer
• Year: 1996
• Tongue: English
• Weight: 684 KB
• Volume: 3
• Category: Article
• ISSN: 0927-5940
• DOI: 10.1007/bf00418945

✦ Synopsis

This paper studies the role of social insurance as a redistributive mechanism in presence of an optimal (linear or general) income tax. It considers a second-best setting with two unobservable individual characteristics: ability, measured by the wage rate and risk, measured by the probability of incurring a loss. It shows that both tax progressivity and the optimal level of social insurance crucially depend on the correlation between ability and risk.