Negative marginal tax rates and heterogeneity

Heterogeneity is likely to be an important determinant of the shape of optimal tax schemes. This article addresses the issue in a model � la Mirrlees with a continuum of agents. The agents differ in their productivities and opportunity costs of work, but their labor supplies depend only on a unidimensional combination of their two characteristics. Conditions are given under which the standard result that marginal tax rates are everywhere non-negative holds. This is in particular the case when work opportunity costs are distributed independently of productivities. But one can also get negative marginal tax rates: economies where negative tax rates are optimal at the bottom of the income distribution are studied, and a numerical illustration is given, based on UK data.Optimal taxation, heterogeneity, welfare.

Optimal Taxation and Monopsonistic Labor Market: Does Monopsony justify the Minimum Wage?

Does monopsony on the labor market in itself justify the implementation of a minimum wage when it would not be used in a competitive economy? This issue is studied in a model of optimal taxation. We adopt a definition most favorable to the minimum wage: the minimum wage is useful whenever it can replace a non negligible part of the tax schedule. The minimum wage is useful to correct the inefficiencies associated with the monopsony when there is a single skill. But the minimum wage is not useful any more when there are a continuum of skills.Minimum wage, Optimal taxation, Monopsony.

Does Fertility Respond to Financial Incentives?

There has been little empirical work evaluating the sensitivity of fertility to financial incentives at the household level. We put forward an identification strategy that relies on the fact that variation of wages induces variation in benefits and tax credits among "comparable households. We implement this approach by estimating a discrete choice model of female participation and fertility, using individual data from the French Labor Force Survey and a fairly detailed representation of the French tax-benefit system. Our results suggest that financial incentives play a notable role in determining fertility decisions in France, both for the first and for the third child. As an example, an unconditional child benefit with a direct cost of 0.3% of GDP might raise total fertility by about 0.3 point.population, fertility, incentives, benefits

Separability and public finance

In a second best environment, the optimal policy choice sometimes follows the first best rules. This note lays down the information structure and separability assumptions under which this property holds in a variety of setups.separability, second best optimality, indirect taxes, Samuelson rule, Pigovian taxation

Optimal taxation in the extensive model

We study optimal taxation in the general extensive model: the only decision of the participants in the economy is to choose between working (full time) or staying inactive. People differ in their productivities and in other features which determine their work opportunity costs. The qualitative properties of optimal tax schemes are presented, with an emphasis on the role of heterogeneity in the equity-efficiency tradeoff. When the government has a redistributive stance, there are a number of cases where the low skilled workers face larger financial incentives to work than in the laissez-faire (negative average tax rates). In particular, this occurs whenever the social weights vary continuously with income and the social weight assigned to the less skilled workers is larger than average.

Le chômage des années 1970 était-il classique?

L’objet du présent article est d’examiner, en s’appuyant sur les résultats des modèles macroéconométriques relatifs à l’économie française, comment le modèle à prix fixes rend compte de la conjoncture des années 1970. Nous commençons par rappeler brièvement la structure de ces modèles. Puis nous décrivons les résultats pertinents pour le problème à l’étude et nous essayons de voir si les points faibles de ces travaux empiriques sont responsables de l’importance très modérée qu’ils accordent au chômage classique. Nous terminons par quelques suggestions de spécifications alternatives pouvant éventuellement donner une place plus importante à ce type de chômage.The purpose of this paper is to examine, using macro-econometric models based on French data, how the fix-price model describes the economic situation of the 1970's. The structure of these models is briefly surveyed and, with regards to the present paper, the more relevant results are given. The possibility that weaknesses in the empirical works explain the low probability that the economy is in a classical unemployment regime in then explored. Some suggestions of alternative specifications are formulated. These suggested changes might give a higher probability of occurence of this kind of regime

Investissement et politique monétaire dans le court terme : une présentation du modèle IS-LM

Ce texte présente le modèle IS-LM en tirant partie des développements de la théorie macroéconomique des vingt dernières années. La demande de monnaie de transaction est modélisée à la Clower, et la demande d’investissement physique est dérivée d’un comportement de maximisation de profit actualisé. On discute la validité des conclusions de l’analyse traditionnelle en regard des hypothèses sur les anticipations. On retrouve entre autres la situation, mise en avant par Barro (1974), où financements du déficit budgétaire par emprunt ou par impôt sont équivalents. On montre que la liaison entre politique monétaire et investissement dépend étroitement de la forme des anticipations de salaires et de prix des investisseurs.In this article, the IS-LM model is reexamined in light of the developments of macroeconomic theory in the past two decades. The transaction demand for money is described through a Clower constraint, and the demand for physical investment is derived from the maximization of the sum of the discounted profits of the entrepreneurs. The conclusions of the traditional analysis are discussed in relationship with assumptions on expectations formation. Among other results, one obtains the equivalence between bond financing and tax financing of government deficits of Barro (1974), as a consequence of a particular expectation assumption. The link between monetary policy and investment appears to be highly dependent on the shape of the price and wage expectations of the investors

Le chômage des années 1970 était-il classique?

The purpose of this paper is to examine, using macro-econometric models based on French data, how the fix-price model describes the economic situation of the 1970's. The structure of these models is briefly surveyed and, with regards to the present paper, the more relevant results are given. The possibility that weaknesses in the empirical works explain the low probability that the economy is in a classical unemployment regime in then explored. Some suggestions of alternative specifications are formulated. These suggested changes might give a higher probability of occurence of this kind of regime. L’objet du présent article est d’examiner, en s’appuyant sur les résultats des modèles macroéconométriques relatifs à l’économie française, comment le modèle à prix fixes rend compte de la conjoncture des années 1970. Nous commençons par rappeler brièvement la structure de ces modèles. Puis nous décrivons les résultats pertinents pour le problème à l’étude et nous essayons de voir si les points faibles de ces travaux empiriques sont responsables de l’importance très modérée qu’ils accordent au chômage classique. Nous terminons par quelques suggestions de spécifications alternatives pouvant éventuellement donner une place plus importante à ce type de chômage.

Extensive and Intensive Margins of Labour Supply: Working Hours in the US, UK and France

This paper documents the key stylised facts underlying the evolution of labour supply at the extensive and intensive margins in the last forty years in three countries: United-States, United-Kingdom and France. We develop a statistical decomposition that provides bounds on changes at the extensive and intensive margins. This decomposition is also shown to be coherent with the analysis of labour supply elasticities at these margins. We use detailed representative micro-datasets to examine the relative importance of the extensive and intensive margins in explaining the overall changes in total hours worked.labor supply, employment, hours of work

Does Fertility Respond to Financial Incentives?

There has been little empirical work evaluating the sensitivity of fertility to financial incentives at the household level. We put forward an identification strategy that relies on the fact that variation of wages induces variation in benefits and tax credits among "comparable" households. We implement this approach by estimating a discrete choice model of female participation and fertility, using individual data from the French Labor Force Survey and a fairly detailed representation of the French tax-benefit system. Our results suggest that financial incentives play a notable role in determining fertility decisions in France, both for the first and for the third child. As an example, an unconditional child benefit with a direct cost of 0.3% of GDP might raise total fertility by about 0.3 point