We study a generalization of Mirrlees' income taxation model in which qualifications of workers are both endogenous and observable by the government. Individuals differ by their inobservable abilities, which affect simultaneously their disutility of labor and their cost of training. In general the optimal tax schedule does not only depend on income but also on its "components", namely wage rate (or qualification) and labor supply. We find conditions under which it is optimal to subsidize lower qualifications or to encourage work sharing.
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Paper provided by Toulouse - GREMAQ in its series Papers with number
96.404.
Find related papers by JEL classification: J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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