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Optimal wage redistribution in the presence of adverse selection in the labor market
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics. CESifo, Dresden, Germany..
CESifo, Dresden, Germany.;Ben Gurion Univ Negev, Dept Econ, IL-84105 Beer Sheva, Israel.;IZA, Dresden, Germany..
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics. CESifo, Dresden, Germany.;Univ Milan, Dept Law, I-20122 Milan, Italy.;Bocconi Univ, Dondena Ctr Res Social Dynam & Publ Policy, Rome, Italy..
2015 (English)In: Journal of Public Economics, ISSN 0047-2727, E-ISSN 1879-2316, Vol. 131, 41-57 p.Article in journal (Refereed) Published
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Abstract [en]

In this paper we highlight a novel role played by the non-linear income tax in the presence of adverse selection in the labor market due to asymmetric information between workers and firms. Relying on the Rothschild and Stiglitz equilibrium concept, we show that an appropriate choice of the tax schedule enables the government to affect the wage distribution by controlling the transmission of information in the labor market. This represents an additional channel through which the government can foster the pursuit of its redistributive goals.

Place, publisher, year, edition, pages
2015. Vol. 131, 41-57 p.
Keyword [en]
Adverse selection, Labor market, Optimal taxation, Pooling, Redistribution
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-269984DOI: 10.1016/j.jpubeco.2015.08.005ISI: 000365056600005OAI: oai:DiVA.org:uu-269984DiVA: diva2:892508
Funder
The Jan Wallander and Tom Hedelius Foundation
Available from: 2016-01-11 Created: 2015-12-19 Last updated: 2017-12-01Bibliographically approved

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Bastani, SpencerMicheletto, Luca

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