Optimal taxes and tariffs with private information
The implications of private information regarding a worker's skills for optimal tax policy in an open economy are explored. Two cases are considered. In one general skills are private information and in the other sector-specific skills are private information. It is shown that for a small open economy tariffs and other equivalent trade distortions are not part of the optimal tax policy in either case. In both cases the optimal policy distorts the labor-leisure choice but only in the case of sector-specific skills as private information are labor allocation decisions distorted. For a large country, distortions that are equivalent to the standard optimal tariff formula characterize the optimal tax policy. © Springer Science+Business Media, LLC 2008.
Duke Scholars
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Related Subject Headings
- Economics
- 3803 Economic theory
- 3802 Econometrics
- 3801 Applied economics
- 14 Economics
Citation
Published In
DOI
ISSN
Publication Date
Volume
Issue
Start / End Page
Related Subject Headings
- Economics
- 3803 Economic theory
- 3802 Econometrics
- 3801 Applied economics
- 14 Economics