From the 1980s onward, income inequality increased in many advanced countries. It is very difficult to account for the rise in income inequality using the standard labour supply/demand explanation. Fiscal redistribution has become less effective in compensating increasing inequalities since the 1990s. Some of the basic features of redistribution can be explained through the optimal tax framework developed by J. A. Mirrlees in 1971. This Element surveys some of the earlier results in linear and nonlinear taxation and produces some new numerical results. Given the key role of capital income in the overall income inequality, it also considers the optimal taxation of capital income. It examines empirically the relationship between the extent of redistribution and the components of the Mirrlees framework. The redistributive role of factors such as publicly provided private goods, public employment, endogenous wages in the overlapping generations model and income uncertainty are analysed.
Work, Inequality, and Public Policy (WIP)
Strand leaders
Work, Inequality, and Public Policy (WIP)
Teams
Collaborators and scientific counsellors
Ravi Kanbur, professor of Economics, Cornell University
Vidar Christiansen, professor of Economics, University of Oslo
Rolf Aaberge, Statistics Norway

Extensions in optimal redistribution models

Inequalities and well-being

Multidimensional poverty, social mobility, and aversion to income fluctuations

Change, inequality and the labour market

Challenges for social, active labour market and education policies
Strategic Research
Aims
This research project will address a wide range of inequalities and how these are modified by public policy in the short run and over a life-cycle. This information is a crucial input to government’s decision how to finance the welfare system and redistribute income while maintaining incentives to work and avoiding poverty traps. The project is divided into five strands. On the basis of new knowledge we can state what are the lessons for policies in order to reduce inequalities.
Extensions in optimal redistribution models
We study extensions to the basic optimal redistribution model ála Mirrlees (1971). The extensions include the choice between the channels of finance and redistribution (cash or in kind), and design …
Inequalities and well-being
We investigate inequality developments using multidimensional and lifetime perspectives, and how they have evolved under different market pressures and in particularly, in response to policy changes. Team leader: Associate Professor, Academy of …
Multidimensional poverty, social mobility and aversion to income fluctuations
We will provide detailed information on the dynamics of inequality, poverty, and health over a period with substantial changes in the Finnish economy and relate these to the changes in the …
Change, inequality and the labour market
We provide extensive new evidence on trends in job polarisation and its consequences at individual, firm, regional and aggregate level in Finland, including inequality through unemployment and inactivity. Team leader: Professor …
Challenges for social, active labour market and education policies
We evaluate how effective present day social policies are to meet ‘new social’ risks and new forms of employment, we use microsimulation with a discrete-choice labour supply model to study the …
News
New WIP-research
New publication “Inequality and Optimal Redistribution” from Hannu Tanninen, Matti Tuomala and Elina Tuominen.
Work, Inequality, and Public Policy (WIP)
Publications
Work, Inequality, and Public Policy (WIP)
Scribbles
Köyhyys on pitkittynyt Suomessa
Suomalaiset ja kansanväliset virastot ja tutkimuslaitokset julkaisevat kansainvälisiä vertailuita tulonjaosta ja köyhyydestä. Suomessa ja monissa muissakin maissa vertailut perustuvat vuosittaisiin poikkileikkaustilanteen tietoihin. Poikkileikkaustiedot eivät pysty paljastamaan köyhyyden dynamiikkaa ja kestoa. …
Pitäisikö työttömyysvakuutus tehdä pakolliseksi?
Talouspolitiikan arviointineuvosto esitti vuoden 2016 raportissaan pakollista työttömyysvakuutusta. Raportin mukaan ”olisi hyviä syitä tehdä työttömyysturvajärjestelmästä pakollinen sosiaalivakuutus vapaaehtoisen työttömyyskassan jäsenyyteen perustuvan järjestelmän sijaan.” Hyväksi syyksi osoittautuu markkinoiden epäonnistuminen epätäydellisen informaation …
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Consortium and team leaders
- Principal investigator (PI): Professor Matti Tuomala, University of Tampere
- Team leader: Professor Jukka Pirttilä, University of Tampere
- Team leader: Associate Professor, Academy of Finland Research Fellow Sakari Saaritsa, University of Helsinki
- Team leader: Professor Markus Jäntti, University of Helsinki and VATT Institute for Economic Research
- Team leader (vice PI): Professor Jari Vainiomäki, University of Tampere
- Team leader: Professor Olli Kangas, Kela
Communication
Core interaction group
- Juha Antila, Central Organisation of Finnish Trade Unions
- Jukka Haapakoski, Finnish National Organization of the Unemployed
- Tuulia Hakola-Uusitalo, Ministry of Finance
- Olli Kangas, Kela
- Anne Knaapi, Finnish Federation for Social Affairs and Health
- Susan Kuivalainen, Finnish Centre for Pensions
- Marja-Liisa Parjanne, Ministry of Social Affairs and Health
- Simo Pinomaa, Confederation of Finnish Industries
- Elina Pylkkänen, Ministry of Finance
- Heikki Räisänen, Ministry of Employment and the Economy
- Tuire Santamäki-Vuori, National Institute for Health and Welfare
- Ralf Sund, Finnish Confederation of Professionals
- Veli-Matti Törmälehto, Statistics Finland
- Katja Veirto, Confederation of Unions for Professional and Managerial Staff in Finland
- Reijo Vuorento, Association of Finnish Local and Regional Authorities
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Work, Inequality, and Public Policy (WIP)
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