Distortionary Taxation for Efficient Redistribution by Borys Grochulski
General equilibrium theory — a starting point for much economic analysis — suggests that market allocations are efficient and that the societally preferred level of income redistribution can in principle be achieved by non-distortionary lump-sum taxes and transfers. But when governments do not possess sufficiently fine information about people’s preferences, this finding does not hold. Richmond Fed economist Borys Grochulski studies the use of distortionary taxes — taxes that alter people’s incentives — to achieve a given level of redistribution.
You can find the full text of this article and others in the latest issue of Economic Quarterly at:
Also in the Summer 2009 issue:
The Economic Quarterly is a free publication containing economic analysis pertinent to Federal Reserve monetary and banking policy. For free copies or more information, contact the Federal Reserve Bank of Richmond’s Public Affairs office at (804) 697-7982.
The Richmond Fed serves the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. As part of the nation's central bank, we're one of 12 regional Reserve Banks that work together with the Federal Reserve's Board of Governors to strengthen the economy and our communities. We manage the nation's money supply to keep inflation low and help the economy grow. We also supervise and regulate financial institutions to help safeguard our nation's financial system and protect the integrity and efficiency of our payments system.