Pro-rich Inflation and Optimal Income Taxation

Gürer, Eren
Weichenrieder, Alfons J.
We study the implications of an increase in the price of necessities, which disproportionally hurts the poor, for optimal income taxation. When the government is utilitarian and disutility from labor supply is linear, the optimal nominal taxes and transfers are unchanged as households supply more labor to secure their consumption expenditures. Quantitative analyses with convex disutility of labor supply reveal that, because of positive labor supply effects, keeping average tax rates constant suffices to optimally react to the asymmetric price shock. The poorest agents increase their labor supply the most. Thus, optimal income tax policy in response to asymmetric price changes does not prevent the disproportional decline in the indirect utility of poorer households.


Rising markups and optimal redistributive taxation
Gürer, Eren (2022-10-01)
This study explores the implications of rising markups for optimal Mirrleesian income and profit taxation. Using a stylized model with two individuals, the main forces shaping welfare-optimal policies are analytically characterized. Although a higher profit tax has redistributive benefits, it adversely affects market competition, leading to a greater equilibrium cost-of-living. Rising markups directly contribute to a decline in optimal marginal taxes on labor income. The optimal policy response to higher ma...
Pro-rich inflation in Europe: Implications for the measurement of inequality
Gürer, Eren; Weichenrieder, Alfons (2020-04-01)
This paper studies the distributional consequences of a systematic variation in expenditure shares and prices. Using European Union Household Budget Surveys and Harmonized Index of Consumer Prices data, we construct household-specific price indices and reveal the existence of a pro-rich inflation in Europe. Over the period 2001-15, the consumption bundles of the poorest deciles in 25 European countries have, on average, become 11.2 percentage points more expensive than those of the richest deciles. We find ...
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Çalışmada konu üzerine literatürden derlenen görüşler ışığında, çevreye ve topluma duyarlı tasarım anlayışının - özel sermayedarların ve karma ekonomilerin sistem içerisinde daha fazla üretimin, satın alımın ve tüketimin öngörüldüğü dünyada- nasıl yer edinebileceği, sürdürülebilirlik kavramının tasarım disiplinindeki yeri ve tasarımcının rolü tartışılacaktır. Çalışma endüstri ürünleri tasarımcısının sürdürülebilir kalkınmadaki konumunun tanımlanması ile başlayıp, endüstri ürünleri tasarımı kavramındaki sürd...
Determination of inflation rate in a hidden markov model framework: Turkey case
Aydoğan, Dilek; Kestel, Sevtap Ayşe; Yolcu Okur, Yeliz; Department of Financial Mathematics (2015)
Inflation is a significant issue that is cared by every segment of society but especially by economists since it plays an important role in the economic problems of countries. In Turkey, inflation has been a substantial problem since 1970s. There is no stability at inflation rates from that time to 2003. The Central Bank of the Republic of Turkey became independent and started to apply implicit inflation target regime at 2001. As a result of these improvements inflation was taken under control at 2004. Alth...
The effect of the global financial crisis on household income, inequality and poverty in Turkey
Şeker, Sırma Demir; Dayıoğlu Tayfur, Meltem (Orta Doğu Teknik Üniversitesi (Ankara, Turkey), 2016-4)
Using a nationally representative large scale micro data, we investigate the effect of the Global Financial Crisis (GFC) on household income, inequality and poverty in Turkey. In assessing the impact of the GFC, we take 2007 (pre-crisis year) as the benchmark and compare 2009 to 2007 and to 2011 (post-crisis period). We find that (real) household disposable income drops by 3.6 percent from 2007 to 2009, but that the decline in equivalized income is lower at 1.2 percent. Income inequality decreases over...
Citation Formats
E. Gürer and A. J. Weichenrieder, “Pro-rich Inflation and Optimal Income Taxation,” PUBLIC FINANCE REVIEW, vol. 49, no. 6, pp. 815–844, 2021, Accessed: 00, 2023. [Online]. Available: