Optimal redistributive taxation with both labor supply and labor demand responses

Arbeitspapier

This paper characterizes the optimal redistributive tax schedule in a matching unemployment framework with endogenous (voluntary) nonparticipation and (involuntary) unemployment. The optimal employment tax rate is given by an inverse employment elasticity rule. This rule depends on the global response of the employment rate, which depends not only on the participation (labor supply) responses, but also on the vacancy posting (labor demand) responses and on the product of these two types of responses. For plausible parameters, our matching environment induces much lower employment tax rates than the usual competitive participation model.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 5642

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: optimal taxation ; labor market frictions ; unemployment ; Optimale Besteuerung ; Einkommensteuer ; Steuerprogression ; Steuerwirkung ; Sozialtransfer ; Arbeitsangebot ; Arbeitsnachfrage ; Theorie der Arbeitslosigkeit ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jacquet, Laurence ; Lehmann, Etienne ; van der Linden, Bruno
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/52046
• URN: urn:nbn:de:101:1-201104193292
• Last update: 10.03.2025, 11:42 AM CET