This paper follows the theory of optimal taxation and the goal is to identify a tax/benefit design that maximizes social welfare. A two stage process is proposed where the individuals preferred choice of leisure and consumption is solved in the first stage, and the second stage identifies the...

Should two-band income taxes be progressive given a general income distribution? We provide a negative answer under utilitarian and max-min welfare functions. While this result clarifies some ambiguities in the literature, it does not rule out progressive taxes in general. If we maximize total...

The public finance literature demonstrates the equivalence between consumption and laborincome (wage) taxes. We introduce an experimental paradigm in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this paradigm to test whether a labor-income...

The paper asks why retirement can be so abrupt in countries such as France (1/2% of the workforce over 65), yet staged in Japan (8% over 65). We find part of the answer in tax laws that prevent people working and receiving a pension, and make little allowance for fair pension increases if...

This paper characterizes optimal non-linear income taxation in an economy with a continuum of unobservable productivity levels and endogenous involuntary unemployment due to frictions in the labor markets. Redistributive taxation distorts labor demand and wages. Compared to their efficient...

This paper characterizes the optimal redistributive taxation when individuals are heterogeneous in two exogenous dimensions: their skills and their values of non-market activities. Search-matching frictions on the labor markets create unemployment. Wages, labor demand and participation are...

This paper characterizes optimal income taxation when individuals respond along both the intensive and extensive margins. Individuals are heterogeneous across two dimensions: specifically, their skill and disutility of participation. Preferences over consumption and work effort can differ with...

We propose a canonical model of optimal nonlinear redistributive taxation with matching unemployment. In our model, agents are endowed with different skill levels and labor markets are perfectly segmented by skill. The government only observes negotiated wages. More progressive taxation leads to...

We study the impact of income taxation on both partners' allocation of time to market work and unpaid house work in households with two adults. We estimate a structural household utility model in which the marginal utilities of leisure and house work of both partners are modelled as random...

We use micro data from the U.S. Internal Revenue Service to document how households' tax liabilities vary with income, marital status and the number of dependents. We report facts on the distributions of average and marginal taxes, properties of the joint distributions of taxes paid and income,...