Social Exclusion and Optimal Redistribution

Thomas Aronsson (), Spencer Bastani and Khayyam Tayibov ()
Additional contact information
Thomas Aronsson: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden, https://www.umu.se/handelshogskolan
Khayyam Tayibov: Department of Economics and Statistics, School of Business and Economics, Linnaeus University, Växjö, https://lnu.se/en/meet-linnaeus-university/Organisation/school-of-business-and-economics/

No 1004, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: We integrate social exclusion, operationalized in terms of long-term unemployment, into the theory of optimal redistributive taxation. Our results show how an optimal mix of education policy, public employment, and support to the unemployed, in conjunction with optimal income taxation, contributes to redistribution and reduced long-term unemployment. The second-best optimum most likely implies overprovision of education relative to a policy rule that balances the direct marginal benefit and marginal cost, whereas public employment and unemployment benefits are underprovided. Our calibration shows how the policy mix varies with the government’s preferences for redistribution and the characteristics of those risking long-term unemployment.

Keywords: long-term unemployment; education; optimal income taxation; public sector employment (search for similar items in EconPapers)
JEL-codes: D82 H21 J31 J83 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2021-11-25
New Economics Papers: this item is included in nep-lab, nep-ore, nep-pbe and nep-pub
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Working Paper: Social Exclusion and Optimal Redistribution (2021)
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