Optimal Wage Redistribution in the Presence of Adverse Selection in the Labor Market

Spencer Bastani, Tomer Blumkin and Luca Micheletto

No 4938, CESifo Working Paper Series from CESifo

Abstract: In this paper we allude to a novel role played by the non-linear income tax system in the presence of adverse selection in the labor market due to asymmetric information between workers and firms. We show that an appropriate choice of the tax schedule enables the government to affect the wage distribution by controlling the transmission of information in the labor market. This represents an additional channel through which the government can foster the pursuit of its redistributive goals.

Keywords: adverse selection; labor market; optimal taxation; pooling; redistribution (search for similar items in EconPapers)
JEL-codes: D82 H21 J31 (search for similar items in EconPapers)
Date: 2014
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Related works:
Journal Article: Optimal wage redistribution in the presence of adverse selection in the labor market (2015)
Working Paper: Optimal Wage Redistribution in the Presence of Adverse Selection in the Labor Market (2015)
Working Paper: Optimal Wage Redistribution in the Presence of Adverse Selection in the Labor Market (2015)
Working Paper: Optimal Wage Redistribution in the Presence of Adverse Selection in the Labor Market (2015)
Working Paper: Optimal Wage Redistribution in the Presence of Adverse Selection in the Labor Market (2014)
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