Celestial Mechanics

This book deals with the problems of redistribution if different kinds of taxes are used as instruments. It throws light on the equity, efficiency and insurance aspects of taxation, and treats the topic at a high theoretical level. Using two ordinal equity criteria, it is shown in the first part of the book that equity and efficiency cannot be reconciled in a general model. Even if in a more restricted model equitable states exist, they cannot be implemented using an income tax. Part two of the book scrutinizes the range for redistribution which remains in a first best world if there is imperfect information and only special signals can be observed such as labour supply, income, or both. The range of redistribution for these kinds of taxes is illustrated and compared. In part three, a situation under uncertainty where a tax works as an insurance is investigated. The structure of the optimal tax scheme for several welfare functions is explored. The results with respect to equity and the range of redistribution for different sorts of taxes are of particular interest. The approach to the subject is not really new, since standard microeconomic tools are used. The book's beneficial contribution lies in its presentation of new results with respect to the equity debate and to the incentive compatibility literature.