Heterogeneity in Needs and Negative Marginal Tax Rates

32 Pages Posted: 1 Dec 2017

See all articles by Spencer Bastani

Spencer Bastani

IFAU - Institute for Labour Market Policy Evaluation; Linnaeus University - Department of Economics and Statistics; Research Institute of Industrial Economics (IFN)

Soren Blomquist

Uppsala University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Luca Micheletto

University of Milan

Date Written: October 26, 2017

Abstract

This paper highlights the possibility that negative marginal tax rates arise in an intensive-margin optimal income tax model where wages are exogenous and preferences are homogeneous, but where agents differ both in skills (labor market productivity) and their needs for a work-related consumption good.

Keywords: nonlinear income taxation, negative marginal tax rates, heterogeneity in needs, redistribution

JEL Classification: H210

Suggested Citation

Bastani, Spencer and Blomquist, Soren and Micheletto, Luca, Heterogeneity in Needs and Negative Marginal Tax Rates (October 26, 2017). CESifo Working Paper Series No. 6708, Available at SSRN: https://ssrn.com/abstract=3079392

Spencer Bastani

IFAU - Institute for Labour Market Policy Evaluation ( email )

Box 513
751 20 Uppsala
Sweden

Linnaeus University - Department of Economics and Statistics ( email )

Växjö, 351 06
Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Soren Blomquist

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden
+46 18 471 1102 (Phone)
+46 18 471 1478 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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

Luca Micheletto (Contact Author)

University of Milan ( email )

Via Festa del Perdono, 7
Milan, 20122
Italy

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