Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20759
Authors: 
Hungerbühler, Mathias
Lehmann, Etienne
Parmentier, Alexis
van der Linden, Bruno
Year of Publication: 
2005
Series/Report no.: 
IZA Discussion paper series 1460
Abstract: 
This paper characterizes optimal non-linear income taxation in an economy with a continuum of unobservable productivity levels and endogenous involuntary unemployment due to frictions in the labor markets. Redistributive taxation distorts labor demand and wages. Compared to their efficient values, gross wages, unemployment and participation are lower. Average tax rates are increasing. Marginal tax rates are positive, even at the top. Finally, numerical simulations suggest that redistribution is much more important in our setting than in a comparable Mirrlees (1971) setting.
Subjects: 
optimal income taxation
unemployment
wage bargaining
matching
JEL: 
J64
H21
D82
H24
Document Type: 
Working Paper

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