This paper analyzes the effects of introducing a graduated minimum wage in a model with optimal in-come taxation in which a government seeks to maximize social welfare. It shows that the optimal graduated minimum wage increases social welfare by increasing the lowproductivity workers'...

We build a theoretical model to study whether a minimum wage can be welfare-improving if it is implemented in conjunction with an optimized nonlinear income tax. We consider this issue in a framework where search frictions on the labor market generate unemployment. Workers differ in...

This paper shows that a graduated minimum wage, in contrast to a constant minimum wage, can provide a strict Pareto improvement over what can be achieved with an optimal income tax. The reason is that a graduated minimum wage requires high-productivity workers to work more to earn the same...

We study optimal income taxation in a framework where one's willingness to report his income truthfully is positively correlated with his type. We show that allowing low-productivity types to cheat leads to Pareto-superior outcomes as compared to deterring them, even if audits can be performed...

Restrictions on work hours are more important in countries with a large welfare state. We show that this empirical observation is consistent with the strategic effects of such restrictions in a welfare state in the context of optimal direct taxation in the tradition of Mirrlees (1971). Our...

Gender Based Taxation (GBT) satisfies Ramsey's optimal criterion by taxing less the more elastic labor supply of (married) women. This holds when different elasticities between men and women are taken as exogenous and primitive. But in this paper we also explore differences in gender...

The various channels through which a reduction in the cost of offshoring can improve wages in a developed country are by now well understood. But does a similar reduction in the offshoring cost also benefit workers in the world's factories in developing countries? Using a parsimonious...

Recent empirical literature documents that targeted tax reductions or minimum wages can have unintended reallocation and spillover effects on workers not directly targeted by these policies. We quantify these effects using an equilibrium search-and-matching model estimated on French data before...

In a number of high-income countries over the past few decades there has been a large growth in income inequality and at the same time a shift in the burden of taxation from the top to the middle of the income distribution. This paper applies the theory of optimal piecewise linear taxation to...