Econometrica: Sep, 1987, Volume 55, Issue 5

Comparative Static Properties of Optimal Nonlinear Income Taxes

https://doi.org/0012-9682(198709)55:5<1165:CSPOON>2.0.CO;2-P
p. 1165-1185

John A. Weymark

Comparative static properties of optimal nonlinear income taxes are obtained for a finite population version of the Mirrlees income tax model with a weighted utilitarian social welfare function and quasilinear preferences. The parameters which are varied are the weights in the welfare function, the slope of the production constraint, and a parameter in the utility function. The endogenous variables are the consumers' consumption levels, pretax incomes (labor supplies in efficiency units), utility levels, and marginal tax rates. For the variations in the parameters considered, it is always possible to sign the directions of change in the levels of consumption and, in some cases, it is possible to sign the directions of change in all of the endogenous variables.