Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
969283 | Journal of Public Economics | 2004 | 32 Pages |
Abstract
In order to explore the optimal taxation of low-skilled labor, we extend the standard model of optimal nonlinear income taxation in the presence of quasi-linear preferences in leisure by allowing for involuntary unemployment, job search and an exogenous welfare benefit. In trading off low-skilled employment against work effort of higher skilled workers, the government balances distortions on the search margin with those on work effort. Higher welfare benefits typically reduce taxes paid by low-skilled workers and raise marginal tax rates throughout the skill distribution.
Related Topics
Social Sciences and Humanities
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Economics and Econometrics
Authors
Jan Boone, Lans Bovenberg,