 Optimal Income Taxation and Job ChoiceRobin Boadway, Zhen Song and Jean-François Tremblay No 599, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics Abstract: This paper studies optimal income taxation when there are different types of jobs for workers of different skills. Each type of job has a given feasible range of incomes from which workers can choose by varying their labour supply. Workers are more productive than all others in the jobs that suit them best. The model combines features of the classic optimal income tax literature with labour variability along the intensive margin with those of the extensive-margin approach where workers make discrete job choices and/or participation decisions. Some specific results are as follows. First-best maximin levels of utility can be achieved in the second-best. Marginal tax rates below the top can often be negative or zero. When there are more than two skill-types of workers and jobs, incentive constraints are not necessarily binding on adjacent types as in the standard intensive-margin model. When participation decisions are allowed, the intensive margin and the extensive margin tend to have opposite effects on the level of participation taxes. Keywords: optimal income tax; job choice; intensive margin; extensive margin (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:599 Access Statistics for this paper More papers in CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics Contact information at EDIRC. |
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