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Optimal Redistribution with Intensive and Extensive Labor Supply Margins: A Life-Cycle Perspective

  • Jean-Baptiste Michau

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS)

While the participation decision is discrete in a static context, i.e. to work or not to work, such is not the case in a life-cycle context where workers choose the fraction of their lifetime that they spend working. In this paper, I therefore characterize the optimal redistribution policy in a life-cycle framework with both an intensive and an extensive margin of labor supply. The government should optimally design a history-dependent social security system which induces higher productivity individuals to retire later. Some redistribution therefore needs to be done through the pension system; a standard non-linear income tax is not enough.

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Date of creation: 08 Nov 2011
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Handle: RePEc:hal:wpaper:hal-00639121
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  7. Beaudry, Paul & Blackorby, Charles, 2006. "Taxes and Employment Subsidies in Optimal Redistribution Programs," The Warwick Economics Research Paper Series (TWERPS) 766, University of Warwick, Department of Economics.
  8. Richard Blundell & Antoine Bozio & Guy Laroque, 2011. "Extensive and intensive margins of labour supply: working hours in the US, UK and France," IFS Working Papers W11/01, Institute for Fiscal Studies.
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  19. Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059, December.
  20. Georges De Menil & Robert Fenge & Pierre Pestieau, 2008. "Pension Strategies in Europe and the United States," Post-Print halshs-00754865, HAL.
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