Economics, Econometrics and Finance
4 years ago

New study shows higher taxes lead to lower wages and unemployment

The Review of Economic Studies
Optimal Redistributive Taxation in a Search Equilibrium Model
Mathias Hungerbühler, Étienne Lehmann, Alexis Parmentier, Bruno Van der Linden

Paper Summary

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The article explores how to best tax incomes in a model with different productivity levels and job market frictions. Redistributive taxes affect wages and job availability, leading to lower wages and higher unemployment. Taxes increase as income rises, even for high earners. The study shows that redistribution is more crucial in this model compared to others.