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Optimal Redistributive Taxation with both Labor Supply and Labor Demand Responses

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Author Info

  • Bruno Jacquet
  • Etienne Lehmann

    ()
    (CREST)

  • Bruno Van der Linden

Abstract

This paper characterizes the optimal redistributive tax schedule in a matching unemployment framework with endogenous (voluntary) nonparticipation and (involuntary) unemployment. The optimal employment tax rate is given by an inverse employment elasticity rule. This rule depends on the global response of the employment 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 types of responses. For plausible parameters, our matching environment induces much lower employment tax rates than the usual competitive participation model.

(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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Related research

Keywords: Optimal taxation; Labor market frictions; Unemployment;

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References

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Cited by:
  1. Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2014. "The own-wage elasticity of labor demand: A meta-regression analysis," ZEW Discussion Papers 14-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Robin Boadway, 2012. "Recent Advances in Optimal Income Taxation," Hacienda Pública Española, IEF, vol. 200(1), pages 15-39, March.

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