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Talent, equality of opportunity and optimal non-linear income tax

Abstract : We adopt a philosophical perspective of equality of opportunity and address the issue of whether outcome inequalities are legitimate when they come from differences in talent. We propose a cumulative definition of talent. In a dynamic setting, talent is a by-product of past-effort, current effort and innate talent, which becomes a residual as time goes by. It implies that talent can change from the status of a circumstance when people are young to an almost responsibility variable when people are getting older. We plug this definition of talent into the Mirrlees model of optimal non-linear income tax and we show that the conflict between the principle of compensation and the principle of natural reward boils down to the optimal income tax with Rawlsian weights in the second-best setting.
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Contributor : Elisabeth Lhuillier Connect in order to contact the contributor
Submitted on : Monday, February 17, 2020 - 5:59:00 PM
Last modification on : Wednesday, November 3, 2021 - 9:46:19 AM

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Alain Trannoy. Talent, equality of opportunity and optimal non-linear income tax. Journal of Economic Inequality, 2019, 17 (1), pp.5-28. ⟨10.1007/s10888-019-09409-7⟩. ⟨hal-02482031⟩



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