Public finance solutions to high unemployment in Europe have often been advocated during the past years. With unemployment concentrated among the young and unskilled, it has been suggested that the reduction of social security contributions for low wage earnings, financed by a carbon tax, could...

According to the standard principal-agent model, the optimal composition of pay should balance the provision of incentives with the individual demand for insurance. Do income taxes alter this balance? We show that the relative share of PRP on total pay is reduced by higher average taxes, and is...

We study the empirical relationship between labor taxation and pretax wages in Italy. We find that higher tax progressivity increases pretax wages. To explain this result, we introduce in an informal way a relative wage effect and argue that the combination of this effect with the labor supply...