Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82675
Authors: 
Engström, Per
Year of Publication: 
2007
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2007:12
Abstract: 
The paper extends the basic Stiglitz (1982) model of optimal nonlinear income taxation into a model featuring endogenous unemployment and wages. This means that the government needs to consider the effects on wages and unemployment when designing the optimal tax function. The tax systems’ effects on the wage formation and the unemployment rates result in new intricate redistribution channels. A key result of the paper is that the government may, in order to redistribute, use the marginal tax rates to raise the unemployment rate for the high-skilled and lower it for the low-skilled workers.
Subjects: 
Optimal Non-Linear Income Taxation
Wage Formation
Tax Progressivity
Unemployment
JEL: 
H21
J22
J41
J64
Document Type: 
Working Paper

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