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Optimal Income Taxation and Job Choice

Author

Listed:
  • Robin Boadway

    (Queen's University)

  • Zhen Song

    (CEMA & CIAS, Central University of Finance & Economics)

  • Jean-Francois Tremblay

    (University of Ottawa)

Abstract
This paper studies optimal income taxation when there are different types of jobs for workers of different skills. Each type of job has a given feasible range of incomes from which workers can choose by varying their labour supply. Workers are more productive than all others in the jobs that suit them best. The model combines features of the classic optimal income tax literature with labour variability along the intensive margin with those of the extensive-margin approach where workers make discrete job choices and/or participation decisions. Some specific results are as follows. First-best maximin levels of utility can be achieved in the second-best. Marginal tax rates below the top can often be negative or zero. When there are more than two skill-types of workers and jobs, incentive constraints are not necessarily binding on adjacent types as in the standard intensive-margin model. When participation decisions are allowed, the intensive margin and the extensive margin tend to have opposite effects on the level of participation taxes.

Suggested Citation

  • Robin Boadway & Zhen Song & Jean-Francois Tremblay, 2013. "Optimal Income Taxation and Job Choice," CEMA Working Papers 599, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:599
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    References listed on IDEAS

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    Cited by:

    1. Robin Boadway & Zhen Song & Jean‐François Tremblay, 2017. "Optimal Income Taxation and Job Choice," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(4), pages 910-938, October.
    2. Aronsson, Thomas & Bastani, Spencer & Tayibov, Khayyam, 2021. "Social Exclusion and Optimal Redistribution," Umeå Economic Studies 1004, Umeå University, Department of Economics.

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    More about this item

    Keywords

    optimal income tax; job choice; intensive margin; extensive margin;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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