Economics 2450a: Public Economics Section 3-4: Mirrlees Taxation 1 the Model Setup
نویسنده
چکیده
Suppose the agent has preferences over consumption and labor represented by the utility function u (c, l) that we assume separable and quasi-linear such that u (c, l) = c v (l). We assume that v0 (l) > 0 and v00 (l) 0. Each agent earns income z = nl when supplying l hours of labor and consumes c = nl T (nl) after taxes. Individuals are heterogeneous in the salary n that represents their type and we will interpret as a measure of ability. Salaries are distributed according to f (n), with n 2 [n, n̄]. Individual welfare is aggregated through a social welfare function G (· ), that we assume di↵erentiable and concave.
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