Arbeitspapier

Optimal income taxation with endogenous participation and search unemployment

This paper characterizes the optimal redistributive taxation when individuals are heterogeneous in two exogenous dimensions: their skills and their values of non-market activities. Search-matching frictions on the labor markets create unemployment. Wages, labor demand and participation are endogenous. The government only observes wage levels. Under a Maximin objective, if the elasticity of participation decreases along the distribution of skills, at the optimum, the average tax rate is increasing, marginal tax rates are positive everywhere, while wages, unemployment rates and participation rates are distorted downwards compared to their laissez-faire values. A simulation exercise confirms some of these properties under a general utilitarian objective. Taking account of the wage-cum-labor demand margin deeply changes the equity-efficiency trade-off.

Sprache
Englisch

Erschienen in
Series: IZA Discussion Papers ; No. 3804

Klassifikation
Wirtschaft
Asymmetric and Private Information; Mechanism Design
Thema
Non-linear taxation
redistribution
adverse selection
random participation
unemployment
labor market frictions
Optimale Besteuerung
Einkommensteuer
Steuerprogression
Friktionelle Arbeitslosigkeit
Arbeitsangebot
Lohnniveau
Adverse Selection
Arbeitsmarkttheorie
Theorie

Ereignis
Geistige Schöpfung
(wer)
Lehmann, Etienne
Parmentier, Alexis
van der Linden, Bruno
Ereignis
Veröffentlichung
(wer)
Institute for the Study of Labor (IZA)
(wo)
Bonn
(wann)
2008

Handle
URN
urn:nbn:de:101:1-20081126795
Letzte Aktualisierung
20.09.2024, 08:23 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Lehmann, Etienne
  • Parmentier, Alexis
  • van der Linden, Bruno
  • Institute for the Study of Labor (IZA)

Entstanden

  • 2008

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