مالیات بر درآمد مطلوب با مشارکت درونی و بیکاری جستجوگری

We characterize optimal redistributive taxation when individuals are heterogeneous in their skills and their values of non-market activities. Search-matching frictions on the labor markets create unemployment. Wages, labor demand and participation are endogenous. Average tax rates are increasing at the optimum. This shifts wages below their laissez faire value and distorts labor demand upwards. The marginal tax rate is positive at the top of the skill distribution even when the latter is bounded. These results are analytically shown under a Maximin objective when the elasticity of participation is decreasing in the skill level and are numerically confirmed under a more general objective. Under the Maximin, above approximately $20,000 per year, our model recommends higher marginal tax rates than a comparable competitive setting.

In the literature on optimal redistributive taxation, the labor supply responses along the intensive (Mirrlees, 1971) or extensive (Diamond, 1980 and Saez, 2002) margins are the only sources of deadweight losses. However, in this literature, non-employment, if any, is synonymous with non-participation. According to Mirrlees (1999), a “desire is to have a model in which unemployment (in our words, “non-employment”) can arise and persist for reasons other than a preference for leisure.” Along this view, it is important to recognize that some people remain jobless despite they do search for a job at the market wage. To account for the presence of (such involuntary) unemployment which is an important source of inequality, one should depart from the assumption of Walrasian labor markets. We provide an optimal tax formula in a search-matching framework where wages, employment, (involuntary) unemployment and (voluntary) non participation are affected by taxation on labor incomes.

We derive an optimal tax formula in a model where wages, unemployment rates and participation decisions are endogenous. In general, the optimal income tax schedule is characterized by increasing average tax rates. This shifts the burden of taxation away from low skilled workers whose utility are the most valued and whose participation decisions are the most responsive. Due to the reactions of wages and hence of labor demand to taxation, the progressive tax schedule shifts wages below their laissez faire value, so labor demand is distorted upwards.