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Optimal Labour Taxation and Search

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Author Info
Boone, Jan
Bovenberg, A Lans

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Abstract

This Paper explores the optimal role of the tax system in alleviating labour-market imperfections and raising revenue. For this purpose, the standard search model of the labour market is extended by introducing scarce entrepreneurial talent and arbitrage between the supply and demand. We study how these extensions affect the following two 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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3002.

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Date of creation: Oct 2001
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Handle: RePEc:cpr:ceprdp:3002

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Related research
Keywords: labour market optimal tax system search model

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Find related papers by JEL classification:
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, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, vol. 52(1), pages 1-29, August. [Downloadable!] (restricted)
  2. Bovenberg, A Lans & de Mooij, Ruud A, 1997. "Environmental Levies and Distortionary Taxation: Reply," American Economic Review, American Economic Association, vol. 87(1), pages 252-53, March. [Downloadable!] (restricted)
  3. Pissarides, Christopher A, 1985. "Taxes, Subsidies, and Equilibrium Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 52(1), pages 121-33, January. [Downloadable!] (restricted)
  4. Koskela, Erkki & Vilmunen, Jouko, 1996. "Tax progression is good for employment in popular models of trade union behaviour," Labour Economics, Elsevier, vol. 3(1), pages 65-80, August. [Downloadable!] (restricted)
  5. A. Bovenberg & Frederick Van der Ploeg, 1998. "Consequences of Environmental Tax Reform for Unemployment and Welfare," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 12(2), pages 137-150, September. [Downloadable!] (restricted)
  6. Pissarides, Christopher A., 1998. "The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure," European Economic Review, Elsevier, vol. 42(1), pages 155-183, January. [Downloadable!] (restricted)
    Other versions:
  7. Myles, Gareth D., 1989. "Ramsey tax rules for economies with imperfect competition," Journal of Public Economics, Elsevier, vol. 38(1), pages 95-115, February. [Downloadable!] (restricted)
  8. Bovenberg, A.L. & Mooij, R.A. de, 1994. "Environmental Tax Reform and Endogenous Growth," Discussion Paper 98, Tilburg University, Center for Economic Research. [Downloadable!]
  9. Olivier Jean Blanchard & Peter Diamond, 1990. "The Beveridge Curve," NBER Reprints 1405, National Bureau of Economic Research, Inc.
    Other versions:
  10. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
    Other versions:
  11. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier. [Downloadable!] (restricted)
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  12. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 57(2), pages 279-98, April. [Downloadable!] (restricted)
  13. Lans Bovenberg, A. & de Mooij, Ruud A., 1997. "Environmental tax reform and endogenous growth," Journal of Public Economics, Elsevier, vol. 63(2), pages 207-237, January. [Downloadable!] (restricted)
  14. Joseph Stiglitz, 1999. "Taxation, Public Policy, and Dynamics of Unemployment," International Tax and Public Finance, Springer, vol. 6(3), pages 239-262, August. [Downloadable!] (restricted)
  15. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-89, September. [Downloadable!] (restricted)
  16. P. B. Sørensen, 1997. "Public finance solutions to the European unemployment problem?," Economic Policy, CEPR, CES, MSH, vol. 12(25), pages 221-264, October. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mathias, HUNGERBUEHLER, 2004. "The impact of Union Power on the Optimal Income Tax Schedule," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2004034, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  2. Jaag, Christian / Keuschnigg, Christian / Keuschnigg, Mirela, 2007. "Pension Reform, Retirement and Life-Cycle Unemployment," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  3. Christian Keuschnigg, 2003. "Optimal Public Policy For Venture Capital Backed Innovation," University of St. Gallen Department of Economics working paper series 2003 2003-09, Department of Economics, University of St. Gallen. [Downloadable!]
    Other versions:
  4. Engström, Per & Holmlund, Bertil & Kolm, Ann-Sofie, 2001. "Optimal Taxation in Search Equilibrium with Home Production," Working Paper Series 2001:19, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  5. Boone, Jan & Fredriksson, Peter & Holmlund, Bertil & van Ours, Jan, 2001. "Optimal Unemployment Insurance with Monitoring and Sanctions," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  6. Lans Bovenberg, 2003. "Tax Policy and Labor Market Performance," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  7. Bruno, VAN DER LINDEN, 2003. "Unemployment insurance and training in an equilibrium matching model with heterogeneous agents," Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper 2003001, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  8. Boone, J. & Ours, J.C. van, 2004. "Effective active labor market policies," Discussion Paper 87, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  9. Etienne Lehmann & Mathias Hungerbühler, 2007. "On the Optimality of a Minimum Wage: New Insights from Optimal Tax Theory," IZA Discussion Papers 2957, Institute for the Study of Labor (IZA). [Downloadable!]
  10. E. Lehmann & B. Van Der Linden, 2004. "On the Optimality of Search Matching Equilibrium when workers are risk adverse," Working Papers ERMES 0406, ERMES, University Paris 2. [Downloadable!]
    Other versions:
  11. M. Hungerbühler & E. Lehmann & A. Parmentier & P. Van Der Linden, 2003. "Optimal Income Taxation in an Equilibrium Unemployment Model : Mirrlees meets Pissarides," Working Papers ERMES 0306, ERMES, University Paris 2. [Downloadable!]
    Other versions:
  12. Alexis, PARMENTIER, 2006. "The effects of the marginal tax rate in a matching model with endogenous labor supply," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2006011, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  13. Hungerbühler, Mathias & Lehmann, Etienne & Parmentier, Alexis & Van der Linden, Bruno, 2005. "Optimal Redistributive Taxation in a Search Equilibrium Model," IZA Discussion Papers 1460, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  14. Heijdra, B.J. & Ligthart, J.E., 2004. "Labor tax reform and equilibrium unemployment : a search and matching approach," Discussion Paper 89, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
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