Author: Naito, Hisahiro

Source: International Tax and Public Finance, Volume 13, Number 5, September 2006 , pp. 625-640(16)

Publisher: Springer

Abstract:

This paper analyzes the role of production distortion in income redistribution in an international trade model. In particular, it examines the role of the Stolper and Samuelson effect on efficient income redistribution. It first shows that production inefficiency can be part of a Pareto-efficient tax system for a small country when there is an asymmetric information problem between the government and individuals. Second, the paper shows that such production inefficiency is not only Pareto-improving for a small country, but is also essential in achieving worldwide tax-constrained Pareto-efficient allocation. These two results suggest important implications for commercial policies.

Keywords: Non-linear income taxation; Production efficiency; Decentralized efficiency; International trade; Redistribution

Document Type: Research article

DOI: http://dx.doi.org/10.1007/s10797-006-6551-0

Affiliations: 1: Email: naito@dpipe.tsukuba.ac.jp

Publication date: 2006-09-01

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