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Beaudry, Paul,
Charles Blackorby, and
Dezsö Szalay. 2009. "Taxes and Employment Subsidies in Optimal Redistribution Programs."
,
99(1): 216-42.
Show Article Details
DOI: 10.1257/aer.99.1.216
Abstract:This paper explores how to optimally set taxes and transfers when taxation
authorities are uninformed about individuals' value of time in both market and
nonmarket activities; and can observe both market-income and time allocated
to market employment. We show that optimal redistribution in this environment
involves a cutoff wage whereby workers above the cutoff are taxed as they
increase their income, while workers earning a wage below the cutoff receive
an income supplement as they increase their income. Finally, we show that the
optimal program transfers zero income to individuals who choose not to work. 1JEL D31, H21, H23, H242
Additional links:
Appendix
Authors:
Beaudry, Paul (U British Columbia)
Blackorby, Charles (U Warwick and GREQAM)
Szalay, Dezsö (U Warwick)
JEL Classifications:
D31: Personal Income, Wealth, and Their Distributions
H21: Taxation and Subsidies: Efficiency; Optimal Taxation
H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
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