Taxes and Employment Subsidies in Optimal Redistribution Programs ( Revised Version )

@inproceedings{Beaudry2006TaxesAE,
  title={Taxes and Employment Subsidies in Optimal Redistribution Programs ( Revised Version )},
  author={Paul Beaudry and Charles Blackorby and Dezso Szalay},
  year={2006}
}
This paper explores how to optimally set tax and transfers when taxation authorities: (1) are uninformed about individuals’ value of time in both market and non-market activities and (2) can observe both market-income and time allocated to market employment. We show that optimal redistribution in this environment involves distorting market employment upwards for low wage individuals through decreasing wage-contingent employment subsidies, and distorting employment downwards for high wage… CONTINUE READING
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