in The Review of Economic Studies
July 2016; p ublished online March 2016 .
Journal Article. Subjects: Microeconomics; General Equilibrium and Disequilibrium; Welfare Economics; Information, Knowledge, and Uncertainy; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; Taxation, Subsidies, and Revenue; Demand and Supply of Labour; Wages, Compensation, and Labour Costs. 17279 words.
We develop a framework for optimal taxation when agents can earn their income both in traditional activities, where private and social products coincide, and in rent-seeking activities,...