Incentives, Globalization, and Redistribution

Antoine, Ferey; Andreas, Haufler und Carlo, Perroni (9. September 2022): Incentives, Globalization, and Redistribution. Collaborative Research Center Transregio 190, Discussion Paper No. 335

Abstract

We offer a new explanation for why taxes have become less redistributive in many countries in parallel with an increase in income concentration. When performance-based contracts are needed to incentivize effort, redistribution through progressive income taxes becomes less precisely targeted. Taxation reduces after-tax income inequality but undermines performance-based contracts, lowering effort and raising pre-tax income differentials. Product market integration can widen the spread of project returns and make contract choices more responsive to changes in the level of taxation, resulting in a lower optimal income tax rate even when individuals are not inter-jurisdictionally mobile.

• Dokumententyp: Paper
• Keywords: performance contracts; market integration; redistributive taxation
• Fakultät: Volkswirtschaft > Collaborative Research Center Transregio "Rationality and Competition"
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: D63, F15, H21
• Sprache: Englisch