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Optimal income taxation in an equilibrium unemployment model : Mirrlees meets Pissarides

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Hungerbuhler, Mathias [FUNDP] Lehmann, Etienne [Université de Paris 2] Parmentier, Alexis [Université de Paris 1] Van der Linden, Bruno [UCL]

This paper characterizes optimal non-linear income taxation in an economy with a continuum of unobservable productivity levels and endogenous involuntary unemployment due to frictions in the labor markets. Redistributive taxation distorts labor demand and wages. Compared to the laissez-faire, gross wages, unemployment and participation are lower. Average tax rates are increasing. Marginal tax rates are positive, even the top. Finally, numerical simulations suggest that redistribution is much more important in our setting than in a comparable Mirrlees (1971) setting.

Document type Communication à un colloque (Conference Paper) – Présentation orale avec comité de sélection
Publication date 2004
Language Anglais
Conference "16th Annual conference of the European Association of Labour Economists", Lisbonne (du 09/09/2004 au 11/09/2004)
Affiliation UCL - ESPO/ECON - Département des sciences économiques
Keywords Optimal income taxation ; Unemployment ; Wage bargaining ; Matching
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Bibliographic reference Hungerbuhler, Mathias ; Lehmann, Etienne ; Parmentier, Alexis ; Van der Linden, Bruno. Optimal income taxation in an equilibrium unemployment model : Mirrlees meets Pissarides.16th Annual conference of the European Association of Labour Economists (Lisbonne, du 09/09/2004 au 11/09/2004).
Permanent URL http://hdl.handle.net/2078.1/153987