Differences in individuals’ preferences, needs, skills, and information are key to explain variation in individuals’ behavior and to anticipate individuals’ responses to policy changes. There is no consensus, however, about how to take these differences into account when evaluating redistribution policies and individuals have very different opinions about how to do so. The main contribution of the project was to explore how a large spectrum of ethical views can be accommodated in economic frameworks and how these can be used to identify optimal redistribution policies in the context of income, capital, and wealth taxation.
A central building block of the project was to formalize and axiomatically characterize a welfare criterion that prioritizes those individuals who are worse-off relative to a “fair” distribution of resources.
Piacquadio (2020, Journal of Economic Theory) develops these ideas for intergenerational resource distribution problems. The project further generalized and extended these results to accommodate a large set of value judgments for a broad range of redistribution settings, where some inequalities might be justified on the ground of preference diversity, needs, skills, desert, and information (Berg and Piacquadio, 2024; Berg, Håvarstein, and Piacquadio, 2024).
Beyond the ethical choice of the ideal distribution, the project also advanced our understanding of how to deal with inequalities. Nesje and Piacquadio (2024) identify all theories of justice that disentangle social attitudes to discounting and inequality and, thus, prepare the ground for the application of these results to dynamic models.
Finally, Piacquadio (2023) highlights the difference in perspective between "having something" and "being deprived of something" and argues that the latter approach is particularly relevant to study poverty alleviation policies.
The next achievement of the project was to show how the broad range of ethical views maps into optimal taxation policies. For example, Berg and Piacquadio (2024) show that the US income tax system can be rationalized by two ethical choices: first, workers deserve their wage rate; and, second, there is little concern for tax progressivity. Berg, Håvarstein, and Piacquadio (2024) show how different family redistribution policies across European countries can be explained by a different ethical account of household size. Guvenen et al., (2023, Quarterly Journal of Economics) shows that, with heterogeneous returns to investments, capital income and wealth taxation have opposite effects. Under capital income taxation, entrepreneurs who are more productive, and therefore generate more income, pay higher taxes. Under wealth taxation, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity, which expands the tax base, shifts the tax burden toward unproductive entrepreneurs, and raises the savings rate of productive ones.
Kragh-Sørensen (2021) studies instead the optimal taxation of housing property vis-à-vis capital in a dynamic stochastic general equilibrium environment.
