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Optimal Mirrleesian taxation in non-competitive labor markets

Author

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  • Costa, Carlos Eugênio da
  • Maestri, Lucas Jóver
Abstract
We study optimal labor income taxation in non-competitive labor markets. Firms offer screening contracts to workers who have private information about their productivity. A planner endowed with a Paretian social welfare function tries to induce allocations that maximize its objective. We provide necessary and sufficient conditions for implementation of constrained efficient allocations using tax schedules. All allocations that are implementable by a tax schedule display negative marginal tax rates for almost all workers. Not all allocations that are implementable in a competitive setting are implementable in this noncompetitive environment.

Suggested Citation

  • Costa, Carlos Eugênio da & Maestri, Lucas Jóver, 2015. "Optimal Mirrleesian taxation in non-competitive labor markets," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 775, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:775
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    References listed on IDEAS

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    Cited by:

    1. Carlos E. da Costa & Lucas J. Maestri, 2019. "Optimal Mirrleesian taxation in non-competitive labor markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(4), pages 845-886, November.
    2. Zhigang Feng & Anne Villamil, 2022. "Funding employer-based insurance: regressive taxation and premium exclusions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(2), pages 509-540, April.
    3. Thomas Aronsson & Luca Micheletto, 2017. "Optimal Redistributive Income Taxation and Efficiency Wages," Working Papers 107, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
    4. Alexander Tarasov & Robertas Zubrickas, 2021. "Optimal Income Taxation under Monopolistic Competition," CESifo Working Paper Series 9309, CESifo.
    5. Albert Jan Hummel, 2021. "Monopsony power, income taxation and welfare," Tinbergen Institute Discussion Papers 21-051/VI, Tinbergen Institute.
    6. Bahal, Girish & Shrivastava, Anand, 2021. "Supply variabilities in public workfares," Journal of Development Economics, Elsevier, vol. 150(C).
    7. Albert Jan Hummel, 2021. "Tax Curvature," CESifo Working Paper Series 9220, CESifo.
    8. Aronsson, Thomas & Micheletto, Luca, 2017. "Optimal Redistributive Income Taxation and Efficiency Wages," Umeå Economic Studies 953, Umeå University, Department of Economics.
    9. Albert Jan Hummel, 2021. "Monopsony Power, Income Taxation and Welfare," CESifo Working Paper Series 9128, CESifo.
    10. Hummel, Albert Jan, 2023. "Tax curvature," Journal of Public Economics, Elsevier, vol. 224(C).
    11. Spencer Bastani & Sören Blomquist & Luca Micheletto, 2017. "Heterogeneity in Needs and Negative Marginal Tax Rates," CESifo Working Paper Series 6708, CESifo.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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