Using information on desired and actual hours of work, we formulate a discrete choice model of constrained labor supply. Using the German Socio-Economic Panel and the microsimulation model STSM, we find that hours and participation elasticities are substantially smaller than those in the...

Using information on desired and actual hours of work, we formulate a discrete choice model of constrained labor supply, where involuntary unemployment as well as over- and underemployment are modelled in a theoretically consistent way. Using data from the German Socio-Economic Panel (SOEP) and...

The paper studies the design of couples income taxation when consumption and labor supply decisions within the couple are made in a cooperative way according to some bargaining scheme. Specifically, the couple maximizes a weighted sum of the spouses utilities. In the first part of the paper, the...

This paper extends the Mirrlees (1971) model of optimal income redistribution with optimal corrective taxes to internalize consumption externalities. It is demonstrated that the optimal second-best tax on an externality-generating good should not be corrected for the marginal cost of public...

There still seems to be some confusion about the consequences of normalisations in the optimal taxation literature. We claim that:1) Normalisations do not matter for the real solution of optimal taxation problem.2) Normalisations do matter for good characterisations of the solutions to optimal...

Recent estimates of the marginal cost of public funds differ substantially. Some studies argue that the efficiency cost of taxation counter the welfare gain connected to redistribution of income. Hence, the efficiency cost of taxation should not be included as a cost of public goods provision....

Several studies show cases where the Samuelson rule holds, or where the marginal cost of public funds (MCF) equals one within optimized tax systems. The conditions for the original Samuelson rule to hold in these studies are quite restrictive, and MCF measures employed are not consistent with...

Policy makers are generally interested in both the anti-poverty impact and the efficiency of reforms. To connect these two dimensions, I measure the poverty gap change per unit of net revenue that tax-benefit reforms produce. To isolate the impact of reforms and account for labour supply...

This chapter analyzes the distortions created by taxation and the features of tax systems that minimize such distortions (subject to achieving other government objectives). It starts with a review of the theory and practice of deadweight loss measurement, followed by characterizations of optimal...

In the present paper we extend the classical tax-competition framework of Zodrow and Mieszkowski (1986) by modelling involuntary unemployment and by allowing for labour taxation as a second source of public funds. For a large class of production functions (including CES), it turns out that tax...