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The optimal taxation of unskilled labor with job search and social assistance Author info | Abstract | Publisher info | Download info | Related research | Statistics Boone, J.
Bovenberg, L. (Tilburg University, Center for Economic Research)
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In order to explore the optimal taxation of low-skilled labor, we extend the standard model of optimal non-linear income taxation in the presence of quasi-linear preferences in leisure by allowing for involuntary unemployment, job search, an exogenous welfare benefit, and a non-utilitarian social welfare function. In trading off more low-skilled employment against more work effort of higher skilled workers, the government balances distortions on the search margin with those on work effort. Positive marginal tax rates at the bottom may help to encourage job search if this search is taxed on a net basis. Lower welfare benefits and search costs tend to reduce marginal tax rates throughout the skill distribution.
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number
57.
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Date of creation: 2002Date of revision:
Handle: RePEc:dgr:kubcen:200257Contact details of provider: Web page: http://center.uvt.nl
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Keywords: unskilled workers Other versions of this item:
Find related papers by JEL classification: H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
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