Optimal Labor Taxation and Search

50 Pages Posted: 5 Nov 2001

See all articles by Jan Boone

Jan Boone

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); TILEC

A. Lans Bovenberg

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: October 2001

Abstract

This Paper explores the optimal role of the tax system in alleviating labor-market imperfections and raising revenue. For this purpose, the standard search model of the labor market is extended by introducing scarce entrepreneurial talent and arbitrage between the supply and demand. We study how these extensions affect the following two major implications of the standard model: (1) only the ad valorem component of the wage tax should be employed to raise revenue; (2) the optimal tax system should not distort labor-market tightness.

Keywords: Labor market, optimal tax system, search model

JEL Classification: H21, H22, H23, J64

Suggested Citation

Boone, Jan and Bovenberg, A. Lans, Optimal Labor Taxation and Search (October 2001). Available at SSRN: https://ssrn.com/abstract=289261

Jan Boone (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2399 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

A. Lans Bovenberg

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2912 (Phone)
+31 13 466 3066 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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