Labour supply, welfare and the earnings distribution
This paper examines the generation of earnings distributions using a labour supply framework in which individuals face piecewise-linear budget constraints. The possible implications for the distribution of earnings within a population consisting of single individuals having a joint distribution of wage rates and preferences are considered. Attention is given to the form of the distribution in terms of the number and position of modes and antimodes, and their relationship with the structure of taxes and transfers. Since it is necessary to obtain the optimal labour supply for a large number of individuals, attention is also given to the efficient computation of local optima for a tax structure having any number of effective marginal tax rates.
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Volume (Year): 4 (2000-2001)
Issue (Month): 3 (September)
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