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Optimal Participation Taxes

Author

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  • Vidar Christiansen

Abstract

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. I extend the analysis by endogenising wages and show that key conditions will be of the same form as with exogenous wages.

Suggested Citation

  • Vidar Christiansen, 2012. "Optimal Participation Taxes," CESifo Working Paper Series 3941, CESifo.
    • Handle: RePEc:ces:ceswps:_3941
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    References listed on IDEAS

    as
    1. Patricia Apps & Ngo Long & Ray Rees, 2014. "Optimal Piecewise Linear Income Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(4), pages 523-545, August.
    2. Diamond, P., 1980. "Income taxation with fixed hours of work," Journal of Public Economics, Elsevier, vol. 13(1), pages 101-110, February.
    3. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
    4. Immervoll, Herwig & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup & Verdelin, Nicolaj, 2011. "Optimal tax and transfer programs for couples with extensive labor supply responses," Journal of Public Economics, Elsevier, vol. 95(11), pages 1485-1500.
    5. (IFS), Institute for Fiscal Studies (ed.), 2010. "Dimensions of Tax Design: The Mirrlees Review," OUP Catalogue, Oxford University Press, number 9780199553754.
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    Cited by:

    1. Bas Jacobs, 2013. "From Optimal Tax Theory to Applied Tax Policy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(3), pages 338-389, September.
    2. Normann Lorenz & Dominik Sachs, 2012. "Optimal Participation Taxes and Efficient Transfer Phase-Out," Working Paper Series of the Department of Economics, University of Konstanz 2012-37, Department of Economics, University of Konstanz.

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    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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