Optimal Tax Theory: Econometric Evidence and Tax Policy
The purpose of this paper is to provide a progress report on the issue of the implications of optimal tax theory and recent econometric evidence for tax policy. Toward this end, Section 2 provides a brief and often heuristic summary of the major results of optimal tax theory. Section 3 reports the results of some recent econometric studies of saving and labor supply. Finally, Section 4 outlines the implications of the combined theory and econometric evidence for tax policy.
This paper was presented at the International Economic Association Conference on "Contributions of Econometrics to Public Policy," Urbino, Italy, September 1976. I wish to thank Partha Das Gupta and the other conference participants for useful suggestions.
Econometric Contributions to Public Policy, Stone, R., ed.: MacMillan forthe International Economic Associations, 1978.