EconStor >
Forschungsinstitut zur Zukunft der Arbeit (IZA), Bonn >
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA) >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/36898
  
Title:Optimal redistributive taxation with both extensive and intensive responses PDF Logo
Authors:Jacquet, Laurence
Lehmann, Etienne
van der Linden, Bruno
Issue Date:2010
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 4837
Abstract:This paper characterizes optimal income taxation when individuals respond along both the intensive and extensive margins. Individuals are heterogeneous across two dimensions: specifically, their skill and disutility of participation. Preferences over consumption and work effort can differ with respect to the level of skill, with only the Spence-Mirrlees condition imposed. Employing a tax perturbation approach, we derive an optimal tax formula that generalizes previous results by allowing for income effects and extensive margin responses. We provide a sufficient condition for optimal marginal tax rates to be nonnegative everywhere. We discuss the relevance of this condition with analytical examples and numerical simulations using U.S. data.
Subjects:Optimal tax formula
tax perturbation
random participation
JEL:H21
H23
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

Files in This Item:
File Description SizeFormat
622404369.pdf612.75 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/36898

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.