This Handbook entry presents a conceptual, normative overview of the subject of taxation. It emphasizes the relationships among the main functions of taxation—notably, raising revenue, redistributing income, and correcting externalities—and the mapping between these functions and various...

This chapter examines the role of altruistic motives in the economic analysis of public social transfers, both from a positive and from a normative point of view. The positive question is to know whether we can fully neglect altruistic considerations to explain the development or sustainability...

There is a growing debate on the relative merits of universal and targeted social assistancetransfers in achieving income redistribution objectives. While the benefits of targeting areclear, i.e., a larger poverty impact for a given transfer budget or lower fiscal cost for a givenpoverty impact,...

A substantial literature addresses the design of transfer programs and policies, including the negative income tax, other means-tested transfers, the earned income tax credit, categorical assistance, and work inducements. This work is largely independent of that on the optimal nonlinear income...

Specialized theoretical and empirical research should in principle be embedded in a unified framework that identifies the relevant interactions among different phenomena, enables an appropriate matching of policy instruments to objectives, and grounds normative analysis in individuals' utilities...

This paper explores the revenue-raising aspect of progressive taxation and derives, on the basis of a simple model, the optimal degree of tax progressivity where the tax revenue is used exclusively to finance (perfectly) targeted transfers to the poor. The paper shows that not only would it be...

We use a quantitative heterogeneous agent model with nominal rigidities and unemployment risk to analyze the effectiveness of several fiscal policies in stabilizing a demand-driven recession. The model delivers empirically realistic distributions of marginal propensities to consume (mpc) and...

Redistribution across individuals within the framework of a one-year period is an empirically intensely studied question. However, a substantial share of annual redistribution might turn out to serve individual insurance in a longer perspective, reducing the level of actual redistribution across...

Does identification with dominant ethnic groups lead individuals to diverge in their preferences for redistribution? This paper contributes to the comparative analysis of the role of ethnic background in shaping attitudes towards government's role in reducing income inequalities in Indonesia,...