IDEAS home Printed from https://ideas.repec.org/a/ier/iecrev/v28y1987i2p373-88.html
   My bibliography  Save this article

Optimal Wage and Income Taxation with Wage Uncertainty

Author

Listed:
  • Hamilton, Jonathan H

Abstract

Optimal taxation in a two-period model with human-capital investment and second-period wage uncertainty is analyzed. A proportional tax on wages dominates lump-sum taxation and the socially-optimal level of human capital exceeds that which individuals choose. A tax on interest income may raise welfare by encouraging investment in human capital. The interest-income tax reduces the difference between returns to physical and human capital from individuals' inability to reduce human-capital risk through diversification. A positive interest-income tax rate may therefore be optimal, even with an optimal wage tax, by encouraging m ore investment in human capital. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Hamilton, Jonathan H, 1987. "Optimal Wage and Income Taxation with Wage Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(2), pages 373-388, June.
  • Handle: RePEc:ier:iecrev:v:28:y:1987:i:2:p:373-88
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0020-6598%28198706%2928%3A2%3C373%3AOWAITW%3E2.0.CO%3B2-N&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:28:y:1987:i:2:p:373-88. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (). General contact details of provider: http://edirc.repec.org/data/deupaus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.