Lehmann, Etienne (contributor); … - 2008
this formula by considering a marginal tax
reform around the optimum. Unemployment has now two e�ects on social welfare …, imagine a tax reform such that participants of type a face a steeper
logw 7! logx tax function. A relative rise in the wage …�uences
participation decisions. To isolate this e�ect, consider a tax reform that rises log(w T (w) b)
by a constant amount for all w so …