Taxes and Employment Subsidies in Optimal Redistribution Programs

Paul Beaudry and Charles Blackorby

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: This paper explores how to optimally set tax and transfers when taxation authorities : (1) are uninformed about individuals’ value of time in both market and non-market activities and (2) can observe both market-income and time allocated to market employment. 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 phased-out wage-contingent employment subsidies, and distorting employment downward for high net-income individuals through positive and increasing marginal income tax rate. We also show that workfare may also be used as part of an optimal redistribution program.

Keywords: Taxation; Redistribution; Wage Subsidies Screening (search for similar items in EconPapers)
JEL-codes: D82 H21 H23 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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https://warwick.ac.uk/fac/soc/economics/research/w ... s/2006/twerp_766.pdf

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 OPTIMAL REDISTRIBUTION PROGRAMS (2004)
Working Paper: Taxes and Employment Subsidies in Optimal Redistribution Programs (1998)
Working Paper: Taxes and employment subsidies in an optimal redistribution program (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:766

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