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Title:Optimal taxation in the extensive model PDF Logo
Authors:Choné, Philippe
Laroque, Guy
Issue Date:2008
Series/Report no.:IFS working papers 08,08
Abstract:We study optimal taxation in the general extensive model: the only decision of the participants in the economy is to choose between working (full time) or staying inactive. People differ in their productivities and in other features which determine their work opportunity costs. The qualitative properties of optimal tax schemes are presented, with an emphasis on the role of heterogeneity in the equity-efficiency tradeoff. When the government has a redistributive stance, there are a number of cases where the low skilled workers face larger financial incentives to work than in the laissez-faire (negative average tax rates). In particular, this occurs whenever the social weights vary continuously with income and the social weight assigned to the less skilled workers is larger than average.
Subjects:optimal taxation
extensive model
welfare
JEL:H21
H31
Document Type:Working Paper
Appears in Collections:IFS Working Papers, Institute for Fiscal Studies (IFS)

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