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Optimal taxation, social contract and the four worlds of welfare capitalism
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Author(s)
Date Issued
July 2008
Date Available
30T13:50:03Z March 2009
Abstract
Drawing from the formal setting of the optimal tax theory (Mirrlees 1971), the paper identifies the level of Rawlsianism of some European social planner starting from the observation of the real data and redistribution systems and uses it to build a metric that allows measuring the degree of (dis)similarity of the redistribution systems analyzed. It must be considered as a contribution to the comparative research on the structure and typology of the
Welfare State (Esping-Andersen, 1990). In particular we consider the optimal taxation model that combines both intensive (Mirrlees) and extensive (Diamond) margins of labor supply, as suggested by Saez (2002) in order to assess the degree of decommodification of seven European welfare systems. We recover the shape of the social welfare function implicit in taxbenefit
systems by inverting the model on actual effective tax rates, as if existing systems
were optimal according to some Mirrleesian social planner. Actual distributions of incomes before and after redistribution are obtained using a pan-European tax-benefit microsimulation model. Results are discussed in the light of standard classifications of welfare regimes in
Europe. There appears to be a clear coincidence of high decommodification and high Rawlsianism in the Scandinavian, social-democratically influenced welfare states (Denmark). There is an equally clear coincidence of low decommodification and utilitarianism in the Anglo–Saxon liberal model (UK) and in the Southern European welfare states (Italy and Spain). Finally, the Continental European countries (Finland, Germany and France) group
closely together in the middle of the scale, as corporatist and etatist.
Type of Material
Working Paper
Publisher
University College Dublin. School of Economics
Series
UCD Centre for Economic Research Working Paper Series
WP08/16
Copyright (Published Version)
University College Dublin. School of Economics, 2008
Classification
H11
H21
D63
C63
Subject – LCSH
Taxation--Mathematical models
Social policy
Welfare state
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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