Paper #559

Títol:

Income taxation in a frictional labor market

Autor:

Joel Shapiro

Data:

Juny 2001

Resum:

A new model of wage dispersion is used to examine welfare aspects of income taxation. The model retains the dynamics of wage posting models while exogenizing search e¤ort, therefore allowing more insight into policy issues. The results highlight effects that standard analyses do not take into account. The optimal income tax should depend on an incidence effect between workers and firms. This incidence effect arises from firms trying to lower wages as much as possible. An employment tax proves, in certain cases, to be the best method to encourage labor force participation.

Paraules clau:

Wage posting, optimal income taxation, search

Codis JEL:

D83,H21,H22

Àrea de Recerca:

Microeconomia

Publicat a:

Journal of Public Economics, Volume 88, Issues 3-4, pp. 465-479, March 2004

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