IDEAS home Printed from https://ideas.repec.org/p/hhs/umnees/1004.html
   My bibliography  Save this paper

Social Exclusion and Optimal Redistribution

Author

Listed:
  • Aronsson, Thomas

    (Department of Economics, Umeå University)

  • Bastani, Spencer

    (Institute for Evaluation of Labour Market and Education Policy (IFAU), Uppsala and Research Institute for Industrial Economics (IFN), Stockholm, Sweden; Uppsala Center for Fiscal Studies (UCFS), Uppsala Center for Labor Studies (UCLS), CESIfo, Germany.)

  • Tayibov, Khayyam

    (Department of Economics and Statistics, School of Business and Economics, Linnaeus University, Växjö)

Abstract

We integrate social exclusion, operationalized in terms of long-term unemployment, into the theory of optimal redistributive taxation. Our results show how an optimal mix of education policy, public employment, and support to the unemployed, in conjunction with optimal income taxation, contributes to redistribution and reduced long-term unemployment. The second-best optimum most likely implies overprovision of education relative to a policy rule that balances the direct marginal benefit and marginal cost, whereas public employment and unemployment benefits are underprovided. Our calibration shows how the policy mix varies with the government’s preferences for redistribution and the characteristics of those risking long-term unemployment.

Suggested Citation

  • Aronsson, Thomas & Bastani, Spencer & Tayibov, Khayyam, 2021. "Social Exclusion and Optimal Redistribution," Umeå Economic Studies 1004, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:1004
    as

    Download full text from publisher

    File URL: http://www.usbe.umu.se/ues/ues1004.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pohlan, Laura, 2019. "Unemployment and social exclusion," Journal of Economic Behavior & Organization, Elsevier, vol. 164(C), pages 273-299.
    2. Mark Colas & Sebastian Findeisen & Dominik Sachs, 2021. "Optimal Need-Based Financial Aid," Journal of Political Economy, University of Chicago Press, vol. 129(2), pages 492-533.
    3. Thomas Aronsson & Olof Johansson-Stenman, 2018. "Paternalism against Veblen: Optimal Taxation and Non-respected Preferences for Social Comparisons," American Economic Journal: Economic Policy, American Economic Association, vol. 10(1), pages 39-76, February.
    4. Kessing, Sebastian G. & Lipatov, Vilen & Zoubek, J. Malte, 2020. "Optimal taxation under regional inequality," European Economic Review, Elsevier, vol. 126(C).
    5. Robin Boadway & Zhen Song & Jean‐François Tremblay, 2017. "Optimal Income Taxation and Job Choice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(4), pages 910-938, October.
    6. Ravi Kanbur & Tuuli Paukkeri & Jukka Pirttilä & Matti Tuomala, 2018. "Optimal taxation and public provision for poverty reduction," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(1), pages 64-98, February.
    7. Ashley C. Craig, 2023. "Optimal Income Taxation with Spillovers from Employer Learning," American Economic Journal: Economic Policy, American Economic Association, vol. 15(2), pages 82-125, May.
    8. Aronsson, Thomas & Sjogren, Tomas, 2004. "Efficient taxation, wage bargaining and policy coordination," Journal of Public Economics, Elsevier, vol. 88(12), pages 2711-2725, December.
    9. Casey Rothschild & Florian Scheuer, 2016. "Optimal Taxation with Rent-Seeking," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(3), pages 1225-1262.
    10. Mörk, Eva & Ottosson, Lillit & Vikman, Ulrika, 2021. "To work or not to work? Effects of temporary public employment on future employment and benefits," Working Paper Series 2021:12, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    11. Bastani, Spencer & Blumkin, Tomer & Micheletto, Luca, 2015. "Optimal wage redistribution in the presence of adverse selection in the labor market," Journal of Public Economics, Elsevier, vol. 131(C), pages 41-57.
    12. Pirttila, Jukka & Tuomala, Matti, 2004. "Poverty alleviation and tax policy," European Economic Review, Elsevier, vol. 48(5), pages 1075-1090, October.
    13. Carlos da Costa, 2015. "Age-dependent taxes with endogenous human capital formation," 2015 Meeting Papers 824, Society for Economic Dynamics.
    14. Spencer Bastani & Sören Blomquist & Luca Micheletto, 2013. "The Welfare Gains Of Age‐Related Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(4), pages 1219-1249, November.
    15. Lehmann, Etienne & Parmentier, Alexis & Van Der Linden, Bruno, 2011. "Optimal income taxation with endogenous participation and search unemployment," Journal of Public Economics, Elsevier, vol. 95(11), pages 1523-1537.
    16. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 1039-1073.
    17. Craig Brett & John A. Weymark, 2019. "Optimal nonlinear taxation of income and savings without commitment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(1), pages 5-43, February.
    18. A.B. Atkinson & John Hills, 1998. "Exclusion, Employment and Opportunity," CASE Papers 004, Centre for Analysis of Social Exclusion, LSE.
    19. Ravi Kanbur & Matti Tuomala, 2013. "Relativity, Inequality, And Optimal Nonlinear Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(4), pages 1199-1217, November.
    20. Juan Carlos Conesa & Sagiri Kitao & Dirk Krueger, 2009. "Taxing Capital? Not a Bad Idea after All!," American Economic Review, American Economic Association, vol. 99(1), pages 25-48, March.
    21. Mathias Hungerbühler & Etienne Lehmann & Alexis Parmentier & Bruno Van Der Linden, 2006. "Optimal Redistributive Taxation in a Search Equilibrium Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(3), pages 743-767.
    22. Stefanie Stantcheva, 2017. "Optimal Taxation and Human Capital Policies over the Life Cycle," Journal of Political Economy, University of Chicago Press, vol. 125(6), pages 1931-1990.
    23. Ordover, Janusz A. & Phelps, Edmund S., 1979. "On the Concept of Optimal Taxation in an Overlapping-Generations Model of Efficient Growth," Working Papers 79-09, C.V. Starr Center for Applied Economics, New York University.
    24. Aronsson, Thomas & Sjögren, Tomas, 2016. "Quasi-hyperbolic discounting, paternalism and optimal mixed taxation," Mathematical Social Sciences, Elsevier, vol. 84(C), pages 24-36.
    25. Oswald, Andrew J., 1983. "Altruism, jealousy and the theory of optimal non-linear taxation," Journal of Public Economics, Elsevier, vol. 20(1), pages 77-87, February.
    26. Lans Bovenberg, A. & Jacobs, Bas, 2005. "Redistribution and education subsidies are Siamese twins," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2005-2035, December.
    27. Ordover, J. A. & Phelps, E. S., 1979. "The concept of optimal taxation in the overlapping-generations model of capital and wealth," Journal of Public Economics, Elsevier, vol. 12(1), pages 1-26, August.
    28. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    29. Stefanie Stantcheva, 2014. "Optimal Income Taxation with Adverse Selection in the Labour Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(3), pages 1296-1329.
    30. Spencer Bastani & Sören Blomquist & Luca Micheletto, 2020. "Child Care Subsidies, Quality, and Optimal Income Taxation," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 1-37, November.
    31. Darío Maldonado, 2008. "Education policies and optimal taxation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(2), pages 131-143, April.
    32. Aronsson, Thomas & Johansson-Stenman, Olof, 2008. "When the Joneses' consumption hurts: Optimal public good provision and nonlinear income taxation," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 986-997, June.
    33. Spencer Bastani & Tomer Blumkin & Luca Micheletto, 2021. "Optimal Redistribution in the Presence of Signaling," CESifo Working Paper Series 9210, CESifo.
    34. Thomas Aronsson & Luca Micheletto, 2021. "Optimal Redistributive Income Taxation and Efficiency Wages," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 3-32, January.
    35. Blumkin, Tomer & Margalioth, Yoram & Sadka, Efraim, 2007. "Anti-discrimination rules versus income taxation in the pursuit of horizontal equity," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1167-1176, June.
    36. Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
    37. Florian Scheuer, 2014. "Entrepreneurial Taxation with Endogenous Entry," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 126-163, May.
    38. Casey Rothschild & Florian Scheuer, 2013. "Redistributive Taxation in the Roy Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(2), pages 623-668.
    39. A.B. Atkinson & John Hills, 1998. "Exclusion, Employment and Opportunity," CASE Papers case04, Centre for Analysis of Social Exclusion, LSE.
    40. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(2), pages 175-208.
    41. Spencer Bastani & Sören Blomquist & Luca Micheletto, 2013. "The Welfare Gains Of Age‐Related Optimal Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 1219-1249, November.
    42. Bradley, Steve & Crouchley, Rob & Oskrochi, Reza, 2003. "Social exclusion and labour market transitions: a multi-state multi-spell analysis using the BHPS," Labour Economics, Elsevier, vol. 10(6), pages 659-679, December.
    43. Findeisen, Sebastian & Sachs, Dominik, 2016. "Education and optimal dynamic taxation: The role of income-contingent student loans," Journal of Public Economics, Elsevier, vol. 138(C), pages 1-21.
    44. Laurence Ales & Musab Kurnaz & Christopher Sleet, 2015. "Technical Change, Wage Inequality, and Taxes," American Economic Review, American Economic Association, vol. 105(10), pages 3061-3101, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Spencer Bastani & Firouz Gahvari & Luca Micheletto, 2022. "Nonlinear Taxation of Income and Education in the Presence of Income-Misreporting," CESifo Working Paper Series 9987, CESifo.
    2. Paweł Doligalski & Abdoulaye Ndiaye & Nicolas Werquin, 2023. "Redistribution with Performance Pay," Journal of Political Economy Macroeconomics, University of Chicago Press, vol. 1(2), pages 371-402.
    3. OBARA, Takuya, 2018. "Optimal human capital policies under the endogenous choice of educational types," CCES Discussion Paper Series 66_v2, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
    4. Boadway,Robin & Cuff,Katherine, 2022. "Tax Policy," Cambridge Books, Cambridge University Press, number 9781108949453.
    5. Robin Boadway & Zhen Song & Jean‐François Tremblay, 2017. "Optimal Income Taxation and Job Choice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(4), pages 910-938, October.
    6. Waldenstrom, Daniel & Bastani, Spencer, 2018. "How Should Capital Be Taxed? Theory and Evidence from Sweden," CEPR Discussion Papers 12880, C.E.P.R. Discussion Papers.
    7. Spencer Bastani & Tomer Blumkin & Luca Micheletto, 2021. "Optimal Redistribution in the Presence of Signaling," CESifo Working Paper Series 9210, CESifo.
    8. Spencer Bastani & Sebastian Koehne, 2022. "How Should Consumption Be Taxed?," CESifo Working Paper Series 10038, CESifo.
    9. Lawson, Nicholas, 2019. "Taxing the job creators: Efficient taxation with bargaining in hierarchical firms," Labour Economics, Elsevier, vol. 56(C), pages 1-25.
    10. Spencer Bastani & Daniel Waldenström, 2018. "How should capital be taxed? The Swedish experience," Working Papers hal-02878153, HAL.
    11. Bastani, Spencer & Blumkin, Tomer & Micheletto, Luca, 2024. "Optimal redistribution and education signaling," Working Paper Series 2024:8, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    12. OBARA, Takuya, 2017. "Optimal human capital policies under the endogenous choice of educational types," CCES Discussion Paper Series 66, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
    13. Findeisen, Sebastian & Sachs, Dominik, 2017. "Redistribution and insurance with simple tax instruments," Journal of Public Economics, Elsevier, vol. 146(C), pages 58-78.
    14. Aronsson, Thomas & Johansson-Stenman, Olof, 2014. "Positional preferences in time and space: Optimal income taxation with dynamic social comparisons," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 1-23.
    15. Findeisen, Sebastian & Sachs, Dominik, 2015. "Designing efficient college and tax policies," Working Papers 15-09, University of Mannheim, Department of Economics.
    16. Obara Takuya & Tsugawa Shuichi, 2019. "Public Good Provision Financed by Nonlinear Income Tax Under Reduction of Envy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(4), pages 1-16, October.
    17. Aronsson, Thomas & Sjögren, Tomas, 2018. "Optimal Taxation, Redistribution, and Environmental Externalities," International Review of Environmental and Resource Economics, now publishers, vol. 11(3), pages 233-308, August.
    18. Spencer Bastani & Daniel Waldenström, 2020. "How Should Capital Be Taxed?," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 812-846, September.
    19. Alexander Tarasov & Robertas Zubrickas, 2023. "Optimal income taxation under monopolistic competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(2), pages 495-523, August.
    20. Findeisen, Sebastian & Sachs, Dominik, 2016. "Education and optimal dynamic taxation: The role of income-contingent student loans," Journal of Public Economics, Elsevier, vol. 138(C), pages 1-21.

    More about this item

    Keywords

    long-term unemployment; education; optimal income taxation; public sector employment;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights

    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:hhs:umnees:1004. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: David Skog (email available below). General contact details of provider: https://edirc.repec.org/data/inumuse.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.