Abstract
In a model with heterogeneous workers, quasi‐linear utility and both intensive and extensive margins of employment, we investigate welfare with optimal linear taxes and wage subsidies under Rawlsian and utilitarian objectives, and the effects of concern for relative income. Relativity implies much higher optimal utilitarian taxes, but makes little difference to already very high optimal Rawlsian taxes. A substantial wage subsidy is generally optimal. We also consider the political economy of pairwise majority voting preferences for differing policies. Rawlsian redistribution is always defeated, though often by only a modest majority, while a constrained utilitarian policy, with equal transfers to unemployed and employed individuals—a universal basic income—wins a majority in all cases, which is robust to changes in the underlying productivity distribution.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
