Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/26314 
Year of Publication: 
2008
Series/Report no.: 
CESifo Working Paper No. 2269
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper addresses outsourcing in the two-type optimal income tax model. If the government is able to control outsourcing via a direct tax instrument, outsourcing will not affect the marginal income tax structure. In the absence of a direct tax instrument, and under the plausible assumption that higher outsourcing increases the wage differential, the government will implement a lower marginal income tax rate for the low-ability type and a higher marginal income tax rate for the high-ability type than it would otherwise have done.
Subjects: 
outsourcing
optimal nonlinear taxation
JEL: 
H21
H25
J31
J62
Document Type: 
Working Paper
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