Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57294
Authors: 
Jacquet, Laurence
Lehmann, Etienne
Van der Linden, Bruno
Year of Publication: 
2012
Series/Report no.: 
CESifo working paper: Public Finance 3779
Abstract: 
This paper characterizes the optimal redistributive tax schedule in a matching unemployment framework where (voluntary) nonparticipation and (involuntary) unemployment are endogenous. The optimal employment tax rate is given by an inverse employment elasticity rule. This rule depends on the global response of the employment rate, which depends not only on the participation (labor supply) responses, but also on the vacancy posting (labor demand) responses and on the product of these two responses. For plausible values of the parameters, our matching environment induces much lower employment tax rates than the usual competitive model with endogenous participation only.
Subjects: 
optimal taxation
labor market frictions
unemployment
Kalai solution
JEL: 
D82
H21
J64
Document Type: 
Working Paper

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