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Disadvantages
High progressive tax makes work and extra effort become less valuable.
High marginal rates of tax are likely to make entrepreneurs less willing to undertake risks.
Some financial inducement is usually required if people are to be asked to change their location, or undergo training, or accept promotion. Progressive taxation by reducing differentials is likely to have some effect on a person's willingness to any of the above.
Consider an economy with three assets and three states. Let be the matrix of asset payoffs at t=1 and p the vector of asset prices at t=0. Assume p 3 =2. a) Does an ar
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producer equllibrium
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