Optimal Taxation to Correct Job Mismatching

Abstract: This paper presents a new efficiency argument for an accommodating taxation policy on high incomes. Job seekers, applying to different segments of a frictional labor market, do not internalize the consequences of mismatch on the entry decision of firms. Workers are not selective enough, resulting in a lower average job productivity and suboptimal job creation. The output-maximizing policy is anti-redistributive to improve the quality of the jobs prospected. As an income tax affects the sharing of the match surplus, a tax on production (or profits) is required to redress the slope of the wage curve. Neither a minimum wage nor unemployment benefits can fully decentralize optimal search behaviors.

Keywords: anti-redistributive taxation; composition externality; job quality; mismatch; search strategy (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-dge, nep-pbe and nep-pub
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Related works:
Journal Article: Optimal Taxation to Correct Job Mismatching (2021)
Working Paper: Optimal Taxation to Correct Job Mismatching (2017)
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