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Taxes and employment subsidies in optimal redistribution programs
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Beaudry, Paul, Blackorby, Charles and Szalay, Dezsoe (2009) Taxes and employment subsidies in optimal redistribution programs. American Economic Review, Vol.99 (No.1). pp. 216-242. doi:10.1257/aer.99.1.216 ISSN 0002-8282.
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Official URL: http://dx.doi.org/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 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 | ||||
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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 | ||||
Official Date: | March 2009 | ||||
Dates: |
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Volume: | Vol.99 | ||||
Number: | No.1 | ||||
Number of Pages: | 27 | ||||
Page Range: | pp. 216-242 | ||||
DOI: | 10.1257/aer.99.1.216 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Restricted or Subscription Access |
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