scholarly journals Technical Change, Wage Inequality, and Taxes

2015 ◽  
Vol 105 (10) ◽  
pp. 3061-3101 ◽  
Author(s):  
Laurence Ales ◽  
Musab Kurnaz ◽  
Christopher Sleet
Keyword(s):  
Labor Market ◽  
Income Distribution ◽  
Wage Inequality ◽  
Technical Change ◽  
Optimal Policy ◽  
Policy Design ◽  
Income Taxes ◽  
Policy Response ◽  
Assignment Model ◽  
Optimal Tax

This paper considers the normative implications of technical change for tax policy design. A task-to-talent assignment model of the labor market is embedded into an optimal tax problem. Technical change modifies equilibrium wage growth across talents and the substitutability of talents across tasks. The overall optimal policy response is to reduce marginal income taxes on low to middle incomes, while raising those on middle to high incomes. The reform favors those in the middle of the income distribution, reducing their average taxes while lowering transfers to those at the bottom. (JEL D31, H21, H23, H24, J31, O33)

scholarly journals Rising markups and optimal redistributive taxation

2021 ◽  
Author(s):  
Eren Gürer
Keyword(s):  
Optimal Policy ◽  
Market Competition ◽  
Income Taxes ◽  
Policy Response ◽  
Labor Income ◽  
Cost Of Living ◽  
Profit Shifting ◽  
Tax Base ◽  
Redistributive Taxation ◽  
Optimal Policies

AbstractThis study explores the implications of rising markups for optimal Mirrleesian income and profit taxation. Using a stylized model with two individuals, the main forces shaping welfare-optimal policies are analytically characterized. Although a higher profit tax has redistributive benefits, it adversely affects market competition, leading to a greater equilibrium cost-of-living. Rising markups directly contribute to a decline in optimal marginal taxes on labor income. The optimal policy response to higher markups includes increasingly relying on the profit tax to fund redistribution. Declining optimal marginal income taxes assists the redistributive function of the profit tax by contributing to the expansion of the profit tax base. This response alone considerably increases the equilibrium cost-of-living. Nevertheless, a majority of the individuals become better off with the optimal policy. If it is not possible to tax profits optimally, due, for example, to profit shifting, increasing redistribution via income taxes is not optimal; every individual is worse off relative to the scenario with optimal profit taxation.

scholarly journals The impact of a minimum wage change on the distribution of wages and household income

2020 ◽  
Author(s):  
Paul Redmond ◽  
Karina Doorley ◽  
Seamus McGuinness
Keyword(s):  
Income Distribution ◽  
Minimum Wage ◽  
Wage Inequality ◽  
Household Income ◽  
Spillover Effects ◽  
Wage Distribution ◽  
Wage Increase ◽  
Minimum Wage Increase ◽  
Wage Change ◽  
The Impact

Abstract We use distribution regression analysis to study the impact of a 6% increase in the Irish minimum wage on the distribution of hourly wages and household income. Wage inequality, measured by the ratio of wages in the 90th and 10th percentiles and the 75th and 25th percentiles, decreased by approximately 8 and 4%, respectively. The results point towards wage spillover effects up to the 30th percentile of the wage distribution. We show that minimum wage workers are spread throughout the household income distribution and are often located in high-income households. Therefore, while we observe strong effects on the wage distribution, the impact of a minimum wage increase on the household income distribution is quite limited.

scholarly journals Trends in Wage Inequality in the Netherlands

De Economist ◽  
2021 ◽  
Author(s):  
Colja Schneck
Keyword(s):  
Labor Market ◽  
The Netherlands ◽  
Wage Inequality ◽  
Wage Distribution ◽  
Labor Market Institutions ◽  
Market Institutions ◽  
Educational Degree ◽  
Over Time

AbstractIn this paper I analyze changes in the wage distribution in the Netherlands. I use a matched employer-employee dataset that covers the population of employees. Wage inequality increases over the period of 2001–2016. Changes in between-firm wage components are responsible for nearly the entire increase. Increases in the variance of workers’ skills and increases in worker sorting and worker segregation explain the majority of the rise in the variance of wages. These changes are accompanied by a pattern where variation in educational degree and firm average wages become more correlated over time. Finally, it is suggested that labor market institutions in the Netherlands play an important role in mediating overall wage inequality.

scholarly journals Market Imperfections and Income Distribution

2016 ◽  
Vol 16 (2) ◽  
pp. 1147-1167
Author(s):  
Ensar Yılmaz
Keyword(s):  
Labor Market ◽  
Income Inequality ◽  
Income Distribution ◽  
Labor Markets ◽  
Wage Rate ◽  
Consumption Patterns ◽  
Market Imperfections ◽  
Luxury Goods ◽  
Sector Model ◽  
Two Sectors

Abstract This paper aims to search links between market imperfections and functional income distribution. For this purpose we construct a two-sector model – wage goods and luxury goods producing sectors – incorporating imperfections of the product and labor markets under income inequality. In a structure with interdependent and partially monopolistic and competitive markets, we analytically trace up the effects of the changes in power relations proxied by the degree of mark-ups in the product and labor market. The model shows that price and wage mark-ups in two sectors have crucial income distribution implications for the agents in the economy to varying extents. It also demonstrates the effect of the existence of the differentiated consumption patterns arising from income inequality on income distribution. Furthermore, it seems that unemployment level creates externalities on wage rate and on corporate taxes of firms.

Optimal Mirrleesean Taxation in a Ben-Porath Economy

2015 ◽  
Vol 7 (2) ◽  
pp. 219-248 ◽  
Author(s):  
Marek Kapička
Keyword(s):  
Human Capital ◽  
Life Cycle ◽  
Income Taxes ◽  
Optimal Tax ◽  
Cycle Economy ◽  
The Us ◽  
Optimal Taxes

I characterize optimal taxes in a life-cycle economy where ability and human capital are unobservable. I show that unobservable human capital effectively makes preferences over labor nonseparable across age. I generalize the static optimal tax formulas to account for such nonseparabilities and show how they depend both on own-Frisch labor elasticities and cross-Frisch labor elasticities. I calibrate the economy to US data. I find that the optimal marginal income taxes decrease with age, in contrast to both the US tax code and to a model with observable human capital. I demonstrate that the behavior of cross-Frisch elasticities is essential in explaining the decline. (JEL D91, H21, H24, J24)

Skill Biased Technical Change and Labor Market

2021 ◽  
Author(s):  
Michele Battisti ◽  
Massimo Del Gatto ◽  
Christopher Parmeter
Keyword(s):  
Labor Market ◽  
Technical Change
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