‘Applied dynamical optimal taxation’

Daniel Cardona Coll, Elena del Rey Canteli, Francesc Xavier Raurich Puigdevall, María del Mar Racionero Llorente, Matthew Fleming y Nuria Badenes Plá.

As in other recent works, optimal taxation theory is the framework for the study, and here close attention is paid to the evolution of agents ‘productivity’ influenced by changing decisions based on education, etc. which can be deemed endogenous to the redistribution at each period.

The purpose of the paper is two-fold: first, to examine the effects of taxation and redistribution from the standpoints of efficiency and equity in a dynamic framework in cases where the abilities of agents are endogenous to redistribution. And second, to refine the empirical use of optimal tax theory for the analysis of real redistribution schemes.

Overall, this paper seeks to develop a theoretical and empirical instrument that can better rationalize the efficiency vs. equity debate?a debate of social, economic and political import?and thereby aid in gauging the microeconomic impact of alternative redistribution schemes.