English, Article, Journal or magazine article edition: Optimal Income Taxation with Endogenous Participation and Search Unemployment Etienne, LEHMANN; Alexis, PARMENTIER; Bruno, VAN DER LINDEN

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Bookmark: http://trove.nla.gov.au/version/16863
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Optimal income taxation with endogenous participation and search unemployment
Author
  • Etienne, LEHMANN
  • Alexis, PARMENTIER
  • Bruno, VAN DER LINDEN
Physical Description
  • preprint
Notes
  • 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.
  • RePEc:iep:wpidep:0805
  • 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 observed 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-farie 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.
  • Non-linear taxation, Redistribution, Adverse selection, Random participation, Unemployment, Labor market frictions
  • RePEc:ctl:louvec:2008036
Language
  • English
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