Random transfers in second best
نویسندگان
چکیده
Random taxation may be optimal when the tax payers differ in their attitudes towards risk, so that tax randomization enables the government to separate agents who otherwise would have been pooled. The paper provides conditions under which randomization is optimal, both characterizing circumstances where local random deviations are improving in a neighborhood of a non random optimum, and giving conditions satisfied by a global random optimum. A full analytical derivation is provided for economies with two goods and two agents with isoelastic utilities. JEL classification numbers: H21, H23, H26.
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