Unemployment Benefits and Optimal Non-Linear Income Taxation

  title={Unemployment Benefits and Optimal Non-Linear Income Taxation},
  author={Per Engstr{\"o}m},
This paper explores the rationale for unemployment beneÞts as a complement to optimal non-linear income taxation. High-skilled workers and low-skilled workers face different exogenous risks of being unemployed. As long as the low-skilled workers face a higher unemployment risk, we Þnd that there is a case for over-insuring the lowskilled, hence the unemployment beneÞts of the low-skilled should be higher than the pure insurance purpose would prescribe. This effect is likely to prevail in a… CONTINUE READING