We develop a methodology to sign output distortions in the random participation framework. We apply our method to monopoly nonlinear pricing problem, to the regulatory monopoly problem and mainly to the optimal income tax problem. In the latter framework, individuals are heterogeneous across two...

We characterize optimal redistributive taxation when individuals are heterogeneous in their skills and their values of non-market activities. Search-matching frictions on the labor markets create unemployment. Wages, labor demand and participation are endogenous. Average tax rates are increasing...

We derive a general optimal income tax formula when individuals respond along both the intensive and extensive margins and when income effects can prevail. Individuals are heterogeneous across two dimensions: their skill and their disutility of participation. Prefer-ences over consumption and...