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Publications [#15950] of Arie Beresteanu

Papers Submitted

  1. Arie Beresteanu, Momy Dahan, An optimal shape of income tax: evidence from Zero income tax countries - Paraguay and Uruguay (2004)
    (last updated on 2006/05/25)

    Author's Comments:
    under revisions

    Abstract:
    Most of the existing literature on the optimal shape of income tax has a common result - decreasing marginal tax rates - a sharp contrast with real world income tax systems. Diamond (1998) made explicit the factors that affect the optimal shape of income tax rates. Special attention was given to one of the effects: the distribution effect. The main goal of this paper is to empirically explore whether the ‘distribution effect’ implies rising or declining marginal income tax rates with special interest at high levels of income. We estimate the hourly wage distribution as a proxy for the distribution of skills. Based on data from Paraguay and Uruguay, we show that the desired income tax schedule implied by the ‘distribution effect' should exhibit increasing marginal tax rates at high levels of income. We use a nonparametric estimation technique to avoid using any functional form assumptions on the skill distribution.


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