Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/36930
Authors: 
Hungerbühler, Mathias
Lehmann, Etienne
Parmentier, Alexis
van der Linden, Bruno
Year of Publication: 
2010
Series/Report no.: 
Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 4832
Abstract: 
We propose a canonical model of optimal nonlinear redistributive taxation with matching unemployment. In our model, agents are endowed with different skill levels and labor markets are perfectly segmented by skill. The government only observes negotiated wages. More progressive taxation leads to wage moderation that boosts labor demand. We design the optimal nonlinear redistributive tax schedule in the absence of welfare benefits and extensive labor supply margin. Compared to their efficient values, at the optimum gross wages and unemployment are lower. Average tax rates are moreover increasing in wages. The robustness of these properties is also discussed.
Subjects: 
Optimal income taxation
unemployment
matching
JEL: 
H21
H23
J64
Document Type: 
Working Paper

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