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http://hdl.handle.net/10419/65763
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| Title: | | Optimal tax policy and wage subsidy in an imperfectly competitive economy  |
| Authors: | | Selim, Sheikh |
| Issue Date: | | 2010 |
| Series/Report no.: | | Cardiff Economics Working Papers E2010/15 |
| Abstract: | | In an imperfectly competitive economy with direct and indirect taxes, the first best wage subsidy overcompensates workers and provides the incentive to misreport working hours. We show that in the second best optimum where the government cannot use a wage subsidy, the optimal policy is to tax labour income at a zero rate. This policy is optimal because it minimizes the incentive to misreport working hours. |
| Subjects: | | Optimal Taxation Ramsey Problem Wage Subsidy |
| JEL: | | D42 E62 H21 H30 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Cardiff Economics Working Papers
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