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Optimum income taxation and layoff taxes

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  • Pierre Cahuc

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)

  • André Zylberberg

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

Abstract

This paper analyzes optimum income taxation in a model with endogenous job destruction that gives rise to unemployment. It is shown that optimal tax schemes comprise both payroll and layoff taxes when the state provides public unemployment insurance and aims at redistributing income. The optimal layoff tax is equal to the social cost of job destruction, which amounts to the sum of unemployment benefits (that the state pays to unemployed workers) and payroll taxes (that the state does not get when workers are unemployed).

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00255794.

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Date of creation: Oct 2008
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Publication status: Published, Journal of Public Economics, 2008, 92, 10-11, 2003-2019
Handle: RePEc:hal:cesptp:halshs-00255794

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00255794
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Keywords: Layoff taxes; Optimal taxation; Job destruction.;

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  1. Anderson, Patricia M & Meyer, Bruce D, 1993. "Unemployment Insurance in the United States: Layoff Incentives and Cross Subsidies," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 11(1), pages S70-95, January.
  2. Beaudry, Paul & Blackorby, 1997. "Taxes and employment subsidies in an optimal redistribution program," CEPREMAP Working Papers (Couverture Orange) 9709, CEPREMAP.
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  7. Pierre Cahuc & Franck Malherbet, 2001. "Unemployment Compensation Finance and Labor Market Rigidity," Working Papers, Centre de Recherche en Economie et Statistique 2001-37, Centre de Recherche en Economie et Statistique.
  8. Emmanuel Saez, 2000. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," NBER Working Papers 7708, National Bureau of Economic Research, Inc.
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  13. Burdett, Kenneth & Wright, Randall, 1989. "Unemployment Insurance and Short-Time Compensation: The Effects on Layoffs, Hours per Worker, and Wages," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(6), pages 1479-96, December.
  14. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2053, C.E.P.R. Discussion Papers.
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  17. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(114), pages 175-208, April.
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Citations

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Cited by:
  1. Brunello, Giorgio & Bassanini, Andrea & Caroli, Eve, 2014. "Not in my Community: Social Pressure and the Geography of Dismissals," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/13579, Paris Dauphine University.
  2. Cahuc, Pierre & Carcillo, Stéphane, 2011. "Is Short-Time Work a Good Method to Keep Unemployment Down?," IZA Discussion Papers 5430, Institute for the Study of Labor (IZA).
  3. Keith Kuester & Philip Jung, 2012. "Optimal Labor-Market Policy in Recessions," 2012 Meeting Papers, Society for Economic Dynamics 186, Society for Economic Dynamics.
  4. L'Haridon, Olivier & Malherbet, Franck, 2009. "Employment protection reform in search economies," European Economic Review, Elsevier, Elsevier, vol. 53(3), pages 255-273, April.
  5. Christian Keuschnigg & Thomas Davoine, 2010. "Flexicurity and Job Reallocation," University of St. Gallen Department of Economics working paper series 2010, Department of Economics, University of St. Gallen 2010-11, Department of Economics, University of St. Gallen.
  6. Saltari, Enrico & Tilli, Riccardo, 2009. "The role and significance of endogenous firing costs in a matching model with endogenous job destruction," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 38(5), pages 799-808, October.
  7. Vannoorenberghe, G., 2014. "International trade, risk taking and welfare," Journal of International Economics, Elsevier, Elsevier, vol. 92(2), pages 363-374.

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