Optimal labour taxation and search
AbstractThis paper explores the optimal role of the tax system in alleviating labour-market imperfections, raising revenue, and correcting the income distribution. For this purpose, the standard search model of the labour market is extended by introducing non-linear vacancy costs due to scarce entrepreneurial talent and by allowing for arbitrage between being a worker and being an entrepreneur. We study how these extensions affect the following three major implications of the standard model: (1) only the ad valorem component of the wage tax should be employed to raise revenue; (2) the optimal tax system should not distort labour-market tightness; (3) the tax system cannot redistribute from workers to entrepreneurs.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 85 (2002)
Issue (Month): 1 (July)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505578
Other versions of this item:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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