Home | Events Archive | Taxation, Redistribution and Frictional Labor Supply

Taxation, Redistribution and Frictional Labor Supply

  • Series
  • Speaker(s)
    Hakki Yazici (University of Bristol, United Kingdom)
  • Field
  • Location
    Tinbergen Institute Amsterdam, room 1.01
  • Date and time

    June 23, 2022
    16:00 - 17:15

Abstract: This paper analyzes taxation of labor income in frictional labor markets in which income inequality arises due to both ex-ante heterogeneity coming from productivity differentials across workers and residual wage inequality stemming from frictions. The resulting model also features involuntary unemployment, another important phenomenon faced by modern economies. Qualitatively, we find that frictions are a force for lower taxes. Quantitatively, the model calibrated to the U.S. economy shows that the effect of frictions on optimal taxes can be quite significant.