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Optimal Taxation to Correct Job Mismatching

Author

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  • Guillaume Wilemme

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper presents a new efficiency argument for an accommodating taxation policy on high incomes. Job seekers, applying to different segments of a frictional labor market, do not internalize the consequences of mismatch on the entry decision of firms. Workers are not selective enough, resulting in a lower average job productivity and suboptimal job creation. The output-maximizing policy is anti-redistributive to improve the quality of the jobs prospected. As an income tax affects the sharing of the match surplus, a tax on production (or profits) is required to redress the slope of the wage curve. Neither a minimum wage nor unemployment benefits can fully decentralize optimal search behaviors.

Suggested Citation

  • Guillaume Wilemme, 2017. "Optimal Taxation to Correct Job Mismatching," Working Papers halshs-01531309, HAL.
  • Handle: RePEc:hal:wpaper:halshs-01531309
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01531309
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    References listed on IDEAS

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    1. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
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    Cited by:

    1. Antonio Estache & Renaud Foucart, 2018. "On the Political Economy of Industrial, Labor and Social Reforms as Complements," Working Papers ECARES 2018-13, ULB -- Universite Libre de Bruxelles.
    2. Jesper Bagger & Espen Moen & Rune Vejlin, 2018. "Optimal Taxation with On-the-Job Search," 2018 Meeting Papers 805, Society for Economic Dynamics.

    More about this item

    Keywords

    mismatch; job quality; composition externality; anti-redistributive taxation; search strategy;

    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
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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