Taxation, Redistribution and Frictional Labor Supply
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Series
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Speaker(s)Hakki Yazici (University of Bristol, United Kingdom)
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FieldMacroeconomics
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LocationTinbergen Institute Amsterdam, room 1.01
Amsterdam -
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.