Tax reform from the gradient projection viewpoint

J. Tirole*, R. Guesnerie

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

13 Scopus citations

Abstract

This paper examines the problems of gradual tax reform. Desirable small moves of the tax system are determined using the principles of the well-known gradient projection algorithm. Three classical models of public finance are considered. For each of them a continuous time dynamic process is exhibited along which the social welfare function increases until convergence to local second best extrema. Although the selection of trajectories according to the gradient projection method has some arbitrariness, it leads to intuitively and economically appealing rules such as a tax reform analog of the classical optimal taxation result on production efficiency.

Original languageEnglish (US)
Pages (from-to)275-293
Number of pages19
JournalJournal of Public Economics
Volume15
Issue number3
DOIs
StatePublished - Jun 1981

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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