Optimal Labour Taxation and Search

Lans Bovenberg and Jan Boone

No 3002, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper explores the optimal role of the tax system in alleviating labour-market imperfections and raising revenue. For this purpose, the standard search model of the labour market is extended by introducing scarce entrepreneurial talent and arbitrage between the supply and demand. We study how these extensions affect the following two major implications of the standard model: (1) only the ad valorem component of the wage tax should be employed to raise revenue; (2) the optimal tax system should not distort labour-market tightness.

Keywords: Labour market; Optimal tax system; Search model (search for similar items in EconPapers)
JEL-codes: H21 H22 H23 J64 (search for similar items in EconPapers)
Date: 2001-10
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Citations: View citations in EconPapers (6)

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