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Optimal Mirrleesian Taxation in Non-competitive Labor Markets

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  • Carlos da Costa

    (Fundação Getulio Vargas)

Abstract

We study optimal labor income taxation in non-competitive labor markets. Firms with market power offer screening contracts to workers privately informed about their own productivity. We provide necessary and sufficient conditions for tax implementation of constrained efficient allocations in such environment. For a Utilitarian objective, if an allocation is implementable almost all workers face negative marginal tax rates, however, not all allocations that are implementable in a competitive setting are implementable in this non-competitive environment.

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  • Carlos da Costa, 2017. "Optimal Mirrleesian Taxation in Non-competitive Labor Markets," 2017 Meeting Papers 1207, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:1207
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    References listed on IDEAS

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    1. Pierre Cahuc & Guy Laroque, 2014. "Optimal Taxation and Monopsonistic Labor Market: Does Monopsony Justify the Minimum Wage?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(2), pages 259-273, April.
    2. Guesnerie,Roger, 1998. "A Contribution to the Pure Theory of Taxation," Cambridge Books, Cambridge University Press, number 9780521629560.
    3. Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
    4. Peter J. Hammond, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 263-282.
    5. Daron Acemoglu & Robert Shimer, 2000. "Wage and Technology Dispersion," Review of Economic Studies, Oxford University Press, vol. 67(4), pages 585-607.
    6. Costa, Carlos Eugênio da & Maestri, Lucas Jóver, 2015. "Optimal Mirrleesian taxation in non-competitive labor markets," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 775, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    7. Peter J. Hammond, 1987. "Markets as Constraints: Multilateral Incentive Compatibility in Continuum Economies," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 399-412.
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    Cited by:

    1. Aronsson, Thomas & Micheletto, Luca, 2017. "Optimal Redistributive Income Taxation and Efficiency Wages," Umeå Economic Studies 953, Umeå University, Department of Economics.
    2. Thomas Aronsson & Luca Micheletto, 2017. "Optimal Redistributive Income Taxation and Efficiency Wages," Working Papers 107, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
    3. Costa, Carlos Eugênio da & Maestri, Lucas Jóver, 2015. "Optimal Mirrleesian taxation in non-competitive labor markets," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 775, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    4. Spencer Bastani & Sören Blomquist & Luca Micheletto, 2017. "Heterogeneity in Needs and Negative Marginal Tax Rates," CESifo Working Paper Series 6708, CESifo Group Munich.

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