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LABOUR EFFORTS, INTERPERSONAL COMPARISONS OF UTILITY AND OPTIMAL TAXATION

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Keio Economic Society, Keio University
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Abstract

We study the structure of optimal taxation in an economy composed of individuals with the same characteristics except for their productive abilities. We compare the optimal outputs, consumptions and tax rates corresponding to Harsanyi, Nash and Rawls solutions. Some definite results are obtained when there are two types of consumers, and specific studies are made on proportional taxation. We will also give conditions under which the utility level of the more able individual is lower than that of the less able individual and argue that the more able individual have incentive to pretend to be less able if separate tax rates are applied.

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