Notes on Optimal Wage Taxation and Uncertainty
AbstractMost contributions to optimal tax theory have assumed that all prices, including that of leisure, are known with certainty. The purpose of this paper is to analyze optimal taxation when workers have imperfect information about their wages at the time they choose their labor supplies. Both efficiency and redistributive aspects of the problem are considered. The paper begins with a discussion of the positive theory of wage taxation and labor supply under uncertainty. This is followed by a discussion of optimal taxation when individuals are identical, but their wages are stochastic. Finally, the case of simultaneous uncertainty and inequality is discussed. In this part of the paper it is assumed that the government's objective is to maximize a utilitarian social welfare function.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0388.
Date of creation: Feb 1981
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