Optimal Redistributive Taxation with both Extensive and Intensive Responses

Laurence Jacquet, Etienne Lehmann () and Bruno Van der Linden

No 7/2010, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: This paper characterizes the optimal income taxation when individuals respond along both the intensive and extensive margins. Individuals are heterogeneous in two dimensions: their skills and their disutility of participation. Preferences over consumption and work effort can differ with the skill level, only the Spence-Mirrlees condition being imposed. We derive an optimal tax formula thanks to a tax perturbation approach. This formula generalizes previous results by allowing for income effects and extensive margin responses. We provide a sufficient condition for optimal marginal tax rates to be nonnegative everywhere. The relevance of this condition is discussed with analytical examples and numerical simulations on U.S. data.

Keywords: Optimal Tax formula; Tax perturbation; Random participation. (search for similar items in EconPapers)
JEL-codes: H21 H23 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2010-01-28
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.nhh.no/Admin/Public/DWSDownload.aspx?Fi ... pers%2f2010%2f07.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.nhh.no:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
Journal Article: Optimal redistributive taxation with both extensive and intensive responses (2013)
Working Paper: Optimal Redistributive Taxation with both Extensive and Intensive Responses (2010)
Working Paper: Optimal Redistributive Taxation with both Extensive and Intensive Responses (2010)
Working Paper: Optimal Redistributive Taxation with both Extensive and Intensive Responses (2010)
Working Paper: Optimal Redistributive Taxation with Both Extensive and Intensive Responses (2010)
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:hhs:nhheco:2010_007

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by Synne Stormoen ().