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Optimal Participation Taxes

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  • Vidar Christiansen

Abstract

type="main" xml:id="ecca12154-abs-0001"> Addressing extensive labour supply responses, the literature has established a case for larger transfers to the working poor than to even poorer non-working people. This paper casts new light on this result. I argue that the result hinges crucially on the labour supply responses of people in income brackets above that of the working poor. Then, distinguishing between more and less poor working people, I show that if a single working type faces a negative tax, it is the poorer one who does. Finally, I endogenize wages and show that key conditions will be of the same form as before.

Suggested Citation

  • Vidar Christiansen, 2015. "Optimal Participation Taxes," Economica, London School of Economics and Political Science, vol. 82(328), pages 595-612, October.
    • Handle: RePEc:bla:econom:v:82:y:2015:i:328:p:595-612
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    File URL: http://hdl.handle.net/10.1111/ecca.2015.82.issue-328
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    Citations

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    Cited by:

    1. Bagger, Jesper & Moen, Espen R. & Vejlin, Rune Majlund, 2021. "Equilibrium Worker-Firm Allocations and the Deadweight Losses of Taxation," IZA Discussion Papers 14865, Institute of Labor Economics (IZA).
    2. Albert Jan Hummel & Bas Jacobs, 2018. "Optimal Income Taxation in Unionized Labor Markets," CESifo Working Paper Series 7188, CESifo.
    3. Gerritsen, Aart, 2017. "Equity and efficiency in rationed labor markets," Journal of Public Economics, Elsevier, vol. 153(C), pages 56-68.
    4. Aart Gerritsen & Bas Jacobs, 2020. "Is a Minimum Wage an Appropriate Instrument for Redistribution?," Economica, London School of Economics and Political Science, vol. 87(347), pages 611-637, July.
    5. Takao Kataoka & Yoshihiro Takamatsu, 2024. "Optimal labor income taxation and asset distribution in an economy with no insurance market and extensive labor supply responses," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(6), pages 1611-1639, December.
    6. Hummel, Albert Jan & Jacobs, Bas, 2023. "Optimal income taxation in unionized labor markets," Journal of Public Economics, Elsevier, vol. 220(C).
    7. Jesper Bagger & Espen Moen & Rune Vejlin, 2018. "Optimal Taxation with On-the-Job Search," 2018 Meeting Papers 805, Society for Economic Dynamics.
    8. Takao Kataoka & Yoshihiro Takamatsu, 2020. "Optimal age‐dependent income taxation in a dynamic extensive model: The case for negative participation tax on young people," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1338-1367, September.

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