Optimal Redistributive Taxation and Provision of Public Input Goods in an Economy with Outsourcing and Unemployment
AbstractThis paper concerns optimal redistributive income taxation and provision of a public input good in a two-type model with a minimum wage policy implemented for the low-ability type, where firms may use some of their resources for outsourcing by locating part of the production process abroad. Our results show that the incentive to relax the self-selection constraint and the incentive to increase employment among the low-skilled reinforce each other in terms of marginal income taxation. In addition, the appearance of equilibrium unemployment also provides an incentive for the government to directly tax outsourcing. Without a direct instrument for taxing outsourcing, the government may reduce the amount of resources spent on outsourcing by increased provision of the public input good, which is desirable in the sense that reduced outsourcing contributes to less wage inequality and increased employment.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 759.
Length: 26 pages
Date of creation: 27 Nov 2008
Date of revision:
Contact details of provider:
Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
Web page: http://www.econ.umu.se/
More information through EDIRC
outsourcing; optimal nonlinear taxation; public goods; unemployment;
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-2008-12-07 (All new papers)
- NEP-LAB-2008-12-07 (Labour Economics)
- NEP-PBE-2008-12-07 (Public Economics)
- NEP-PUB-2008-12-07 (Public Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robin Boadway & Katherine Cuff, 1999.
"A Minimum Wage Can Be Welfare-Improving and Employment-Enhancing,"
Cahiers de recherche CREFE / CREFE Working Papers
72, CREFE, Université du Québec à Montréal.
- Boadway, Robin & Cuff, Katherine, 2001. "A minimum wage can be welfare-improving and employment-enhancing," European Economic Review, Elsevier, vol. 45(3), pages 553-576, March.
- Robin Boadway & Katherine Cuff, 1999. "A Minimum Wage can be Welfare-Improving and Employment-Enhancing," Working Papers 980, Queen's University, Department of Economics.
- Haskel, Jonathan & Slaughter, Matthew J, 2001.
"Trade, Technology and U.K. Wage Inequality,"
Royal Economic Society, vol. 111(468), pages 163-87, January.
- Haskel, Jonathan & Slaughter, Matthew, 1999. "Trade, Technology and UK Wage Inequality," CEPR Discussion Papers 2091, C.E.P.R. Discussion Papers.
- Jonathan Haskel & Matthew J. Slaughter, 1999. "Trade, Technology and U.K. Wage Inequality," NBER Working Papers 6978, National Bureau of Economic Research, Inc.
- Rebecca Riley & Garry Young, 2003.
"Skill Heterogeneity and Equilibrium Unemployment,"
NIESR Discussion Papers
222, National Institute of Economic and Social Research.
- Hartmut Egger & Peter Egger, 2006.
"International Outsourcing and the Productivity of Low-Skilled Labor in the EU,"
Western Economic Association International, vol. 44(1), pages 98-108, January.
- Hartmut Egger & Peter Egger, . "International Outsourcing and the Productivity of Low-skilled Labour in the EU," WIFO Working Papers 152, WIFO.
- Clemens Fuest & Bernd Huber, 1997. "Wage bargaining, labor-tax progression, and welfare," Journal of Economics, Springer, vol. 66(2), pages 127-150, June.
- Stefan Boeters & Kerstin Schneider, 1999. "Government versus Union. The Structure of Optimal Taxation in a Unionized Labor Market," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 56(2), pages 174-, June.
- Erkki Koskela & Ronnie Schöb, 2000.
"Optimal Factor Income Taxation in the Presence of Unemployment,"
CESifo Working Paper Series
279, CESifo Group Munich.
- Koskela, Erkki & Schob, Ronnie, 2002. " Optimal Factor Income Taxation in the Presence of Unemployment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(3), pages 387-404.
- Koskela, Erkki & Schöb, Ronnie, 2001. "Optimal Factor Income Taxation in the Presence of Unemployment," Discussion Papers 758, The Research Institute of the Finnish Economy.
- Stefanova Boyka M, 2006. "The Political Economy of Outsourcing in the European Union and the East-European Enlargement," Business and Politics, De Gruyter, vol. 8(2), pages 1-45, August.
- Joseph E. Stiglitz, 1982.
"Self-Selection and Pareto Efficient Taxation,"
NBER Working Papers
0632, National Bureau of Economic Research, Inc.
- Thomas Aronsson & Tomas Sjögren, 2004.
"Is the Optimal Labor Income Tax Progressive in a Unionized Economy?,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 106(4), pages 661-675, December.
- Aronsson, Thomas & Sjögren, Tomas, 2002. "Is the Optimal Labor Income Tax Progressive in a Unionized Economy?," UmeÃ¥ Economic Studies 587, Umeå University, Department of Economics.
- Robert C. Feenstra & Gordon H. Hanson, 1999. "The Impact Of Outsourcing And High-Technology Capital On Wages: Estimates For The United States, 1979-1990," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 907-940, August.
- Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
- Mary Amiti & Shang-Jin Wei, 2004.
"Fear of Service Outsourcing: Is it Justified?,"
IMF Working Papers
04/186, International Monetary Fund.
- Geishecker, Ingo & Görg, Holger, 2007.
"Winners and losers: A Micro-level Analysis of International Outsourcing and Wages,"
CEPR Discussion Papers
6484, C.E.P.R. Discussion Papers.
- Ingo Geishecker & Holger Görg, 2008. "Winners and losers: a micro-level analysis of international outsourcing and wages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 243-270, February.
- Marceau, Nicolas & Boadway, Robin, 1994. " Minimum Wage Legislation and Unemployment Insurance as Instruments for Redistribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(1), pages 67-81.
- Thomas Aronsson & Erkki Koskela, 2008. "Outsourcing and Optimal Nonlinear Taxation: A Note," CESifo Working Paper Series 2269, CESifo Group Munich.
- Dolado, Juan José & Kramarz, F. & Manning, A. & Machin, S., 1996. "The economic impact of minimum wages in Europe," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/3305, Universidad Carlos III de Madrid.
- Aronsson, Thomas & Koskela, Erkki, 2008. "Outsourcing and Optimal Nonlinear Taxation: A Note," UmeÃ¥ Economic Studies 737, Umeå University, Department of Economics.
- Alexander Hijzen, 2007. "International Outsourcing, Technological Change, and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 15(1), pages 188-205, 02.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kjell-Göran Holmberg).
If references are entirely missing, you can add them using this form.