Optimal Participation Taxes
AbstractAddressing extensive labour supply responses, the literature has established a case for larger transfers to the working poor than to even poorer non-working people. This paper casts new light on this result. I argue that the result hinges crucially on the labour supply responses of people in income brackets above that of the working poor. Then distinguishing between more and less poor working people, I show that if a single working type faces a negative tax, it is the poorer one. I extend the analysis by endogenising wages and show that key conditions will be of the same form as with exogenous wages.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3941.
Date of creation: 2012
Date of revision:
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
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- Immervoll, Herwig & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup & Verdelin, Nicolaj, 2011. "Optimal tax and transfer programs for couples with extensive labor supply responses," Journal of Public Economics, Elsevier, vol. 95(11), pages 1485-1500.
- Stiglitz, Joseph E., 1982.
"Self-selection and Pareto efficient taxation,"
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Elsevier, vol. 17(2), pages 213-240, March.
- Diamond, P., 1980. "Income taxation with fixed hours of work," Journal of Public Economics, Elsevier, vol. 13(1), pages 101-110, February.
- Normann Lorenz & Dominik Sachs, 2012. "Optimal Participation Taxes and Efficient Transfer Phase-Out," Working Paper Series of the Department of Economics, University of Konstanz 2012-37, Department of Economics, University of Konstanz.
- Bas Jacobs, 2013. "From Optimal Tax Theory to Applied Tax Policy," CESifo Working Paper Series 4151, CESifo Group Munich.
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