Flat income taxation, redistribution and labour market performance
Bas Jacobs (),
Ruud de Mooij () and
Applied Economics, 2010, vol. 42, issue 25, 3209-3220
A flat tax rate on labour income has gained popularity in European countries. This article assesses the attractiveness of such a flat tax in achieving redistributive objectives with the smallest distortions to employment. We do so by using a detailed applied general equilibrium model for the Netherlands. The model is empirically grounded in the data and encompasses decisions on hours worked, labour force participation, skill formation, wage bargaining between unions and firms and a wide variety of institutional details. The simulations suggest that the replacement of the current tax system in the Netherlands by a flat rate will harm labour market performance if aggregate income inequality is contained. Only flat tax reforms that reduce redistribution will raise employment. This finding bolsters the notions from optimal tax literature regarding the equity-efficiency trade off and the superiority of nonlinear taxes to obtain redistributive goals in an efficient way.
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:42:y:2010:i:25:p:3209-3220
Ordering information: This journal article can be ordered from
Access Statistics for this article
Applied Economics is currently edited by Anita Phillips
More articles in Applied Economics from Taylor & Francis Journals
Series data maintained by Chris Longhurst ().