Taxes and Employment Subsidies in Optimal Redistribution Programs

Paul Beaudry, Charles Blackorby and Dezsoe Szalay

American Economic Review, 2009, vol. 99, issue 1, 216-42

Abstract: This paper explores how to optimally set taxes and transfers when taxation authorities are uninformed about individuals' value of time in both market and nonmarket activities; and can observe both market-income and time allocated to market employment. We show that optimal redistribution in this environment involves a cutoff wage whereby workers above the cutoff are taxed as they increase their income, while workers earning a wage below the cutoff receive an income supplement as they increase their income. Finally, we show that the optimal program transfers zero income to individuals who choose not to work. 1JEL D31, H21, H23, H242

JEL-codes: D31 H21 H23 H24 (search for similar items in EconPapers)
Date: 2009
Note: DOI: 10.1257/aer.99.1.216
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Citations: View citations in EconPapers (49)

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Related works:
Working Paper: Taxes and Employment Subsidies in Optimal Redistribution Programs (2006)
Working Paper: Taxes and Employment Subsidies in Optimal Redistribution Programs (2006)
Working Paper: Taxes and Employment Subsidies in Optimal Redistribution Programs (2004)
Working Paper: Taxes and Employment Subsidies in Optimal Redistribution Programs (2004)
Working Paper: TAXES AND EMPLOYMENT SUBSIDIES IN OPTIMAL REDISTRIBUTION PROGRAMS (2004)
Working Paper: Taxes and Employment Subsidies in Optimal Redistribution Programs (1998)
Working Paper: Taxes and employment subsidies in an optimal redistribution program (1997)
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