Optimal taxation in the extensive model

Phillippe Choné and Guy Laroque
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Phillippe Choné: Institute for Fiscal Studies

No W08/08, IFS Working Papers from Institute for Fiscal Studies

Abstract:

We study optimal taxation in the general extensive model: the only decision of the participants in the economy is to choose between working (full time) or staying inactive. People differ in their productivities and in other features which determine their work opportunity costs. The qualitative properties of optimal tax schemes are presented, with an emphasis on the role of heterogeneity in the equity-efficiency tradeoff. When the government has a redistributive stance, there are a number of cases where the low skilled workers face larger financial incentives to work than in the laissez-faire (negative average tax rates). In particular, this occurs whenever the social weights vary continuously with income and the social weight assigned to the less skilled workers is larger than average.

JEL-codes: H21 H31 (search for similar items in EconPapers)
Pages: 29 pp.
Date: 2008-11-04
New Economics Papers: this item is included in nep-lab and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: Optimal taxation in the extensive model (2011)
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