Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/35495
Authors: 
Lehmann, Etienne
Parmentier, Alexis
van der Linden, Bruno
Year of Publication: 
2008
Series/Report no.: 
IZA discussion papers 3804
Abstract: 
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.
Subjects: 
Non-linear taxation
redistribution
adverse selection
random participation
unemployment
labor market frictions
JEL: 
D82
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
406.93 kB





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