Optimal Wage and Income Taxation with Wage Uncertainty
AbstractOptimal taxation in a two-period model with human-capital investment and second-period wage uncertainty is analyzed. A proportional tax on wages dominates lump-sum taxation and the socially-optimal level of human capital exceeds that which individuals choose. A tax on interest income may raise welfare by encouraging investment in human capital. The interest-income tax reduces the difference between returns to physical and human capital from individuals' inability to reduce human-capital risk through diversification. A positive interest-income tax rate may therefore be optimal, even with an optimal wage tax, by encouraging m ore investment in human capital. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 28 (1987)
Issue (Month): 2 (June)
Contact details of provider:
Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or ().
If references are entirely missing, you can add them using this form.