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on Public Finance |
| By: | Hungerbühler, Mathias (University of Namur); Lehmann, Etienne (CREST-INSEE); Parmentier, Alexis (University of Evry); Van der Linden, Bruno (Université Catholique de Louvain) |
| Abstract: | We propose a canonical model of optimal nonlinear redistributive taxation with matching unemployment. In our model, agents are endowed with different skill levels and labor markets are perfectly segmented by skill. The government only observes negotiated wages. More progressive taxation leads to wage moderation that boosts labor demand. We design the optimal nonlinear redistributive tax schedule in the absence of welfare benefits and extensive labor supply margin. Compared to their efficient values, at the optimum gross wages and unemployment are lower. Average tax rates are moreover increasing in wages. The robustness of these properties is also discussed. |
| Keywords: | optimal income taxation, unemployment, matching |
| JEL: | H21 H23 J64 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4832&r=pub |
| By: | Jacquet, Laurence (Norwegian School of Economics and Business Administration); Lehmann, Etienne (CREST-INSEE); Van der Linden, Bruno (Université Catholique de Louvain) |
| Abstract: | This paper characterizes optimal income taxation when individuals respond along both the intensive and extensive margins. Individuals are heterogeneous across two dimensions: specifically, their skill and disutility of participation. Preferences over consumption and work effort can differ with respect to the level of skill, with only the Spence-Mirrlees condition imposed. Employing a tax perturbation approach, we derive an optimal tax formula that generalizes previous results by allowing for income effects and extensive margin responses. We provide a sufficient condition for optimal marginal tax rates to be nonnegative everywhere. We discuss the relevance of this condition with analytical examples and numerical simulations using U.S. data. |
| Keywords: | optimal tax formula, tax perturbation, random participation |
| JEL: | H21 H23 |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4837&r=pub |
| By: | Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Johansson, Dan (Ratio); Stenkula, Mikael (Research Institute of Industrial Economics (IFN)) |
| Abstract: | Public policy affects the prevalence and performance of both productive and high-impact entrepreneurship. High-impact entrepreneurship prospers when knowledge is successfully generated and exploited in the economy. This process depends on complementary key ac-tors who use their competencies in what we denote a competence bloc. Although variations in economic contexts make prescribing a general panacea impossible, a number of relevant policy areas that affect key actors can be identified. In this paper this is done in the areas of tax policy and labor market policy. It is shown that high and/or distortive taxes and heavy labor market regulations impinge on the creation and functioning of competence blocs, thereby reducing high-impact entrepreneurship. |
| Keywords: | Entrepreneurship; Gazelles; High-growth firms; High-impact entrepreneurship Innovation; Institutions; Labor market policy; Tax policy |
| JEL: | H32 L25 L50 M13 O31 P14 |
| Date: | 2010–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0826&r=pub |