(voluntary) nonparticipation and (involuntary) unemployment. The optimal employment tax rate is given by an inverse employment … elasticity rule. This rule depends on the global response of the employment rate, which depends not only on the participation … responses. For plausible parameters, our matching environment induces much lower employment tax rates than the usual competitive …

higher wages, lower employment and higher unemployment under either wage determination regime …

and normative questions concerning modern systems of income taxation. Such models also appear to have strong implications …