IDEAS home Printed from https://ideas.repec.org/p/ctl/louvir/2010008.html

A Simple Theory of Optimal Redistributive Taxation with Equilibrium Unemployment

Author

Listed:
  • Mathias HUNGERBUHLER

    (FUNDP, University of Namur)

  • Etienne LEHMANN

    (CREST, IZA, IDEP and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches économiques et sociales (IRES))

  • Alexis PARMENTIER

    (EPEE - Université d'Evry, TEPP-CNRS and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches économiques et sociales(IRES))

  • Bruno VAN DER LINDEN

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), FNRS, ERMES-Université Paris 2 and IZA)

Abstract

We propose a canonical model of optimal nonlinear redistributive taxation with matching unemployment. In our model, agents are endowed with different skill levels and labor markets are perfectly segmented by skill. The government only observes negotiated wages. More progressive taxation leads to wage moderation that boosts labor demand. We design the optimal nonlinear redistributive tax schedule in the absence of welfare benefits and extensive labor supply margin. Compared to theire efficient values, at the optimum gross wages and unemployment are lower. Average tax rates are moreover increasing in wages. The robustness of these properties is also discussed.

Suggested Citation

  • Mathias HUNGERBUHLER & Etienne LEHMANN & Alexis PARMENTIER & Bruno VAN DER LINDEN, 2010. "A Simple Theory of Optimal Redistributive Taxation with Equilibrium Unemployment," LIDAM Discussion Papers IRES 2010008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:2010008
    as

    Download full text from publisher

    File URL: http://sites.uclouvain.be/econ/DP/IRES/2010008.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ctl:louvir:2010008. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Virginie LEBLANC (email available below). General contact details of provider: https://edirc.repec.org/data/iruclbe.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.