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Optimal Redistributive Taxation with both Labor Supply and Labor Demand Responses

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  • Bruno Jacquet
  • Etienne Lehmann

    ()
    (CREST)

  • Bruno Van der Linden

Abstract

This paper characterizes the optimal redistributive tax schedule in a matching unemployment framework where (voluntary) nonparticipation and (involuntary) un- employment are endogenous. The optimal employment tax rate is given by an inverse employment elasticity rule. This rule depends on the global response of the employ- ment rate, which depends not only on the participation (labor supply) responses, but also on the vacancy posting (labor demand) responses and on the product of these two responses. For plausible values of the parameters, our matching environment induces much lower employment tax rates than the usual competitive model with endogenous participation only.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2011-15.

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Length: 22
Date of creation: May 2011
Date of revision:
Handle: RePEc:crs:wpaper:2011-15

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Keywords: Optimal taxation; Labor market frictions; Unemployment;

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References

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  18. Mathias Hungerb�hler & Etienne Lehmann & Alexis Parmentier & Bruno Van Der Linden, 2006. "Optimal Redistributive Taxation in a Search Equilibrium Model," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 743-767.
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Cited by:
  1. Robin Boadway, 2012. "Recent Advances in Optimal Income Taxation," Hacienda Pública Española, IEF, vol. 200(1), pages 15-39, March.

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