Optimal Redistributive Taxation in a Search Equilibrium Model

Hungerbühler, Mathias; Lehmann, Étienne; Parmentier, Alexis; Linden, Bruno Van der

doi:10.2139/ssrn.650173

Cited by 7 publications

(8 citation statements)

References 39 publications

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“…The third concerns the relative treatment of the voluntary and involuntary unemployed. The general treatment of Hungerbühler et al (2006) illustrates the first two of these. They extend the Mirrlees optimal income tax model by assuming that working hours are fixed, and employment for each skill level is determined by a conventional matching technology relating hires to vacancies and unemployment.…”

Section: Recent Innovationsmentioning

confidence: 94%

“…We limit our focus to the interface between involuntary unemployment and redistribution, where the literature is limited. Optimal redistribution analysis has been extended to settings with fictional/search unemployment by Boone and Bovenberg (2002), Boadway, Cuff, and Marceau (2003), and Hungerbühler et al (2006), and to efficiency‐wage unemployment by Boadway, Cuff, and Marceau (2003) and Holzner, Meier, and Werding (2010).…”

Section: Recent Innovationsmentioning

confidence: 99%

“…Boadway and Cuff (1999) studied monitoring in the context of both temporary involuntary unemployment and long‐run unemployment, where involuntary unemployment is generated by a simple matching technology. Unlike the case, Hungerbühler et al (2006), wages are set competitively by firms in the matching framework rather than being determined by bilateral bargaining. Following the tax evasion literature, administrators are assumed to randomly monitor (audit) the unemployed to verify if they are engaging in job search activities (including accepting job offers).…”

Section: Recent Innovationsmentioning

confidence: 99%

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Viewpoint: Innovations in the theory and practice of redistribution policy

Boadway

2011

Canadian J of Economics

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We present a survey of key results from second-best optimal redistribution theory and their implications for tax-transfer policy. The core results include the CorlettHague theorem, the Deaton conditions, the production-efficiency theorem, the AtkinsonStiglitz theorem, and the Mirrlees-Saez characterization of the optimal non-linear income tax system. These have been augmented in recent years by optimal participation tax rates, the implications of involuntary unemployment, the use of unconventional instruments, such as minimum wages, in-kind transfer, and workfare, and the optimal taxation of capital income and bequests. JEL classification: H21, H23.Innovations en théorie de la redistribution et leurs implications pour la politiqueéconomique. L'auteur présente un survol des principaux résultats théoriques de la redistribution optimale de second-ordre, et de leurs implications pour les politiques d'imposition et de transferts. Les résultats fondamentaux incluent le théorème de Corlett-Hague, les conditions de Deaton, les théorèmes d'efficacité en production, le théorème d'Atkinson-Stiglitz, ainsi que la caractérisation du système optimal d'imposition non-linéaire du revenuà la Mirrlees-Saez. Ces derniers résultats ontété enrichis, au cours des dernières années, par certains autres portant sur les taux d'imposition découlant des allocations conditionnelles, les implications du chômage involontaire, l'usage d'instruments non-conventionnels tels que le salaire minimum, les transferts en nature, le workfare, ainsi que l'imposition optimale des revenus du capital et des legs. Ces résultats sont exposés et leurs implications pour les politiques d'imposition et de transferts sont discutées.

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Section: Recent Innovationsmentioning

confidence: 94%

Section: Recent Innovationsmentioning

confidence: 99%

Section: Recent Innovationsmentioning

confidence: 99%

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Viewpoint: Innovations in the theory and practice of redistribution policy

Boadway

2011

Canadian J of Economics

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“…This paper also contributes to other strands of the literature. First, it adds to the analysis of redistributive policies in labor markets with frictions (e.g., Hungerbühler et al, 2006;Stantcheva, 2014;Sleet and Yazici, 2017;Hummel, 2019;Doligalski et al, 2020;Kroft et al, 2020;Mousavi, 2021;Craig, 2022). Second, it contributes to the analysis of policies for redistributing between capital and labor income earners (e.g., Atesagaoglu and Yazici, 2021;Eeckhout et al, 2021;Hummel, 2021) by formalizing a role for the minimum wage in this problem.…”

Section: Introductionmentioning

confidence: 99%

Minimum Wages and Optimal Redistribution in the Presence of Taxes and Transfers

Vergara¹

2022

Preprint

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This paper characterizes optimal redistribution for a social planner with three instruments: labor income taxes and transfers, corporate income taxes, and a minimum wage. The modeled economy features search-and-matching frictions, generates positive firm profits in equilibrium, and accommodates empirically relevant effects of the minimum wage such as wage spillovers and reallocation effects. I find that minimum wages are more likely to be desirable when corporate taxes are low because minimum wages generate corporate revenue losses and redistribute from capitalists to low-skill workers.Minimum wages can improve welfare even under optimal income taxes by shifting tax incidence when wages bunch at the minimum. I estimate the sufficient statistics that guide the welfare analysis using state-level variation in minimum wages. I find that minimum wages have increased low-skill workers' welfare with null effects on high-skill workers and negative effects on capitalists. Results suggest that, under current corporate tax rates, weak social preferences for redistribution toward low-skill workers would justify small state-level minimum wages increases.

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“…Finally, several papers in the optimal taxation literature allow wages to be determined on private labor markets, for instance Hungerbühler, Lehmann, Parmentier, and Van der Linden (2006); Rothschild and Scheuer (2013, 2016; Stantcheva (2014); Piketty, Saez, and Stantcheva (2014); Werning (2017, 2016); Ales, Kurnaz, and Sleet (2015); Ales and Sleet (2016); Ales, Bellofatto, and Wang (2017); Sachs, Tsyvinski, and Werquin (2020). These papers do not account for wage-rate risk and performance-based earnings caused by moral hazard frictions.…”

Section: Introductionmentioning

confidence: 99%