Redistribution with Performance Pay
Paweł Doligalski,
Abdoulaye Ndiaye and
Nicolas Werquin
Journal of Political Economy Macroeconomics, 2023, vol. 1, issue 2, 371 - 402
Abstract:
Half of the jobs in the United States feature pay for performance. We derive incidence and optimum formulas for the rate of tax progressivity and the top income tax rate when such labor contracts arise from moral hazard frictions within firms. Our first main result is that the sensitivity of the worker’s compensation to performance is roughly invariant to tax progressivity. Second, the optimal tax schedule is strictly less progressive than in standard models that treat pretax earnings risk as exogenous. Quantitatively, the welfare cost of not accounting for performance pay when choosing tax progressivity is 0.3% of consumption.
Date: 2023
References: Add references at CitEc
Citations:
Downloads: (external link)
http://dx.doi.org/10.1086/724511 (application/pdf)
http://dx.doi.org/10.1086/724511 (text/html)
Access to the online full text or PDF requires a subscription.
Related works:
Working Paper: Redistribution with Performance Pay (2022) 
Working Paper: Redistribution with Performance Pay (2020) 
Working Paper: Redistribution with Performance Pay (2020) 
Working Paper: Redistribution with Performance Pay (2020) 
Working Paper: Redistribution with Performance Pay (2020) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ucp:jpemac:doi:10.1086/724511
Access Statistics for this article
More articles in Journal of Political Economy Macroeconomics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().