A Simple Theory of Optimal Redistributive Taxation with Equilibrium Unemployment

Mathias Hungerbühler (), Etienne Lehmann (), Alexis Parmentier () and Bruno Van der Linden
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Alexis Parmentier: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne

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Abstract: We consider an optimal nonlinear income tax problem in a model with search-matching unemployment and where the negotiated pre-tax wage decreases with marginal tax rate but increases with the level of tax. By omitting labor supply Responses, assuming no benefit for the unemployed and an efficient allocation in the absence of tax, we characterize the optimal equity-efficiency trade off. We show that in labor market specific to each interior level of skill, optimal wages and unemployment rates are distorted downwards. Moreover, average tax rate are increasing along the income distribution and marginal tax rate are positive at the top, even when the skill distribution is bonded.

Keywords: optimal income taxation; unemployment; wage bargaining; matching; appariemment; chômage; négociations salariales; Revue AERES; taxation optimale des revenus (search for similar items in EconPapers)
Date: 2012
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Published in Economie publique : Etudes et recherches = Public economics, 2012, 22-23, pp.203--18. ⟨10.4000/economiepublique.8601⟩

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Related works:
Working Paper: A Simple Theory of Optimal Redistributive Taxation with Equilibrium Unemployment (2010)
Working Paper: A Simple Theory of Optimal Redistributive Taxation with Equilibrium Unemployment (2010)
Working Paper: A Simple Theory of Optimal Redistributive Taxation with Equilibrium Unemployment (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01243443

DOI: 10.4000/economiepublique.8601

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