Full Citation

Title: Optimal Income Taxation with Unemployment and Wage Responses: A Sufficient Statistics Approach

Citation Type: Working Paper

Publication Year: 2016

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Abstract: We derive a sufficient statistics optimal tax formula in a general model that incorporates unemployment and endogenous wages, to study the shape of the tax and transfer system at the bottom of the distribution. The sufficient statistics are the macro employment response to taxation and the micro and macro participation responses. We estimate these statistics using policy variation from the U.S. tax and transfer system. Our results suggest that the optimal tax more closely resembles a Negative Income Tax than an Earned Income Tax Credit relative to the case where unemployment and wage responses. . .

Url: http://ftp.iza.org/dp9719.pdf

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Authors: Kroft, Kory; Kucko, Kavan; Lehmann, Etienne; Schmieder, Johannes

Series Title: IZA Discussion Papers

Publication Number: 9719

Institution: IZA

Pages:

Publisher Location: Bonn

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Other

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