Scandinavian Working Papers in Economics

Working Paper Series, Center for Fiscal Studies,
Uppsala University, Department of Economics

No 2013:11: Using the Discrete Model to Derive Optimal Income Tax Rates

Spencer Bastani ()
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Spencer Bastani: Uppsala Center for Fiscal Studies, Postal: Department of Economics, Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: In this paper I perform numerical simulations of the discrete model of optimal income taxation employing a large number of taxpayer types. Moreover, I indicate how the results depend on the number of types used to represent the wage distribution. Finally, I compare simulations of the continuous and discrete optimal tax models under identical circumstances based on US wage data.

Keywords: optimal income taxation; simulations; computational methods

JEL-codes: C63; H21; H24

14 pages, October 2, 2013

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