<p>I take a simple model of linear taxation of labour income and append to it the possibility that the chosen tax schedule triggers conflict in society. I demonstrate theoretically that, under certain assumptions, the resulting set of efficient tax schedules is a proper subset of the set of efficient tax schedules in a standard model without the possibility of conflict. Then, I show in a numerical example that the former set can be much smaller than the latter.</p>

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Efficient taxation of labour income under the threat of conflict

  • Asen Ivanov

摘要

I take a simple model of linear taxation of labour income and append to it the possibility that the chosen tax schedule triggers conflict in society. I demonstrate theoretically that, under certain assumptions, the resulting set of efficient tax schedules is a proper subset of the set of efficient tax schedules in a standard model without the possibility of conflict. Then, I show in a numerical example that the former set can be much smaller than the latter.