This paper argues that the large body of research that follows Mirrlees approach to optimal taxation has been developing in two directions, referred to as the micro and macro literatures. We review the two literatures and argue that both deliver important insights that are often complementary to each other. We argue that merging the micro and macro approaches can prove beneficial to our understanding of the nature of efficient redistribution and social insurance and can deliver implementable policy recommendations.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Asymmetric and private information
- Optimal social insurance
- Optimal taxation
- Redistributive effects