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Optimal Redistributive Taxation in a Search Equilibrium Model

Author

Listed:
  • Mathias Hungerbuehler

    (Université de Namur [Namur])

  • Etienne Lehmann

    () (ERMES - Equipe de recherche sur les marches, l'emploi et la simulation - UP2 - Université Panthéon-Assas - CNRS - Centre National de la Recherche Scientifique)

  • Alexis Parmentier

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)

  • Bruno Van Der Linden

    (UCL IRES - Institut de recherches économiques et sociales - UCL - Université Catholique de Louvain)

Abstract

This paper characterizes optimal non-linear income taxation in an economy with a continuum of unobservable productivity levels and endogenous involuntary unemployment due to frictions in the labour markets. Redistributive taxation distorts labour demand and wages. Compared to their efficient values, gross wages, unemployment, and participation are lower. Average tax rates are increasing. Marginal tax rates are positive, even at the top. Finally, numerical simulations suggest that redistribution is much more important in our setting than in a comparable Mirrlees-type setting.

Suggested Citation

  • Mathias Hungerbuehler & Etienne Lehmann & Alexis Parmentier & Bruno Van Der Linden, 2006. "Optimal Redistributive Taxation in a Search Equilibrium Model," Post-Print hal-01248161, HAL.
  • Handle: RePEc:hal:journl:hal-01248161
    DOI: 10.1111/j.1467-937X.2006.00394.x
    Note: View the original document on HAL open archive server: http://hal.univ-reunion.fr/hal-01248161
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    unemployment; wage bargaining; matching ; optimal income taxation;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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