Taxes and Employment Subsidies in Optimal Redistribution Programs

Paul Beaudry and Charles Blackorby

No 6355, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper characterizes an optimal redistribution program when taxation authorities: (1)" are uninformed about individuals' value of time in both market and non-market activities observe both market-income and time allocated to market employment, and (3) are utilitarian. " Formally, the problem is a special case of a multidimensional screening problem with two" dimensions of unobserved attributes. In contrast to much of the optimal income taxation" literature, we show that optimal redistribution in this environment involves distorting market" employment upwards for low net-income individuals (through negative marginal income taxes or" employment subsidies) and distorting employment downward for high net-income individuals" (through positive marginal income taxes). It is also shown that workfare is only part of an" optimal program if certain individuals have not access to market employment."

JEL-codes: D82 H21 (search for similar items in EconPapers)
Date: 1998-01
Note: LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Paul Beaudry & Charles Blackorby & Dezso Szalay, 2009. "Taxes and Employment Subsidies in Optimal Redistribution Programs," American Economic Review, American Economic Association, vol. 99(1), pages 216-42, March.

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Related works:
Journal Article: Taxes and Employment Subsidies in Optimal Redistribution Programs (2009)
Working Paper: Taxes and Employment Subsidies in Optimal Redistribution Programs (2006)
Working Paper: Taxes and Employment Subsidies in Optimal Redistribution Programs (2004)
Working Paper: Taxes and Employment Subsidies in Optimal Redistribution Programs (2004)
Working Paper: Taxes and employment subsidies in an optimal redistribution program (1997)
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