Outsourcing and Optimal Nonlinear Taxation: A Note

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Outsourcing and Optimal Nonlinear Taxation: A Note

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Aronsson, Thomas () (Department of Economics, Umeå University)
Koskela, Erkki () (Department of Economics)

Abstract

This paper addresses outsourcing in the two-type optimal income tax model. If the government is able to control outsourcing via a direct tax instrument, outsourcing will not affect the marginal income tax structure. In the absence of a direct tax instrument, and under the plausible assumption that higher outsourcing increases the wage differential, the government will implement a lower marginal income tax rate for the low-ability type and a higher marginal income tax rate for the high-ability type than it would otherwise have done.

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Publisher Info
Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 737.

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Length: 9 pages
Date of creation: 03 Apr 2008
Date of revision:
Handle: RePEc:hhs:umnees:0737

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Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
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Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-04-15 (All new papers)
NEP-PBE-2008-04-15 (Public Economics)
NEP-PUB-2008-04-15 (Public Finance)

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Thomas Aronsson & Erkki Koskela, 2008. "Optimal Redistributive Taxation and Provision of Public Input Goods in an Economy with Outsourcing and Unemployment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Aronsson, Thomas & Koskela, Erkki, 2008. "Optimal Redistributive Taxation and Provision of Public Input Goods in an Economy with Outsourcing and Unemployment," UmeÃ¥ Economic Studies 759, Umeå University, Department of Economics. [Downloadable!]

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