Beaudry, Paul, Blackorby, Charles, 1937- and Szalay, Dezsoe. (2009) Taxes and employment subsidies in optimal redistribution programs. American Economic Review, Vol.99 (No.1). pp. 216-242. ISSN 0002-8282

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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 call 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. (JEL D31, H21, H23, H24)

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Economics
Journal or Publication Title:	American Economic Review
Publisher:	American Economic Association
ISSN:	0002-8282
Date:	March 2009
Volume:	Vol.99
Number:	No.1
Number of Pages:	27
Page Range:	pp. 216-242
Identification Number:	10.1257/aer.99.1.216
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
URI:	http://wrap.warwick.ac.uk/id/eprint/28230

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