On the Optimality of the Friedman Rule with Heterogeneous Agents and Nonlinear Income Taxation
Fundação Getulio Vargas; Massachusetts Institute of Technology and National Bureau of Economic Research
Money-in-the-utility-function model with heterogeneous agents differing in labor productivity, subject to nonlinear income taxation under private information about productivity. Nests shopping-time and cash-credit models as special cases.
Section IV, Figure 2
Welfare cost calculation with tau=0.50 (50% income tax); shopping-time model