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This paper characterizes an optimal redistribution program when taxation authorities: (1) are uninformed about individuals value of time in both market and non-market activities, (2) can observe both market-income and time allocated to market employment, and (3) are utilitarian. Formally, the problem is a special case of a multidimensional screening problem with two dimensions of unobserved attributes. In contrast to much of the optimal income taxation literature, we show that optimal redistribution in this environment involves distorting market employment upwards for low net-income individuals (through negative marginal income taxes or employment subsidies) and distorting employment downward for high net-income individuals (through positive marginal income taxes). It is also shown that workfare is only part of an optimal program if certain individuals have not access to market employment.
Conference papers examining economic implications of employment subsidies to encourage employment creation for the socially disadvantaged in the private sector in the USA - covers methodology, the inflation- unemployment trade-off, long term effects, economic models, management attitude, administrative aspects, etc., and makes comparisons with Western Europe. Graphs and tables. List of participants. Conference held in Washington 1980 Apr 3 and 4.
The Fund has recognized in recent years that one cannot separate issues of economic growth and stability on one hand and equality on the other. Indeed, there is a strong case for considering inequality and an inability to sustain economic growth as two sides of the same coin. Central to the Fund’s mandate is providing advice that will enable members’ economies to grow on a sustained basis. But the Fund has rightly been cautious about recommending the use of redistributive policies given that such policies may themselves undercut economic efficiency and the prospects for sustained growth (the so-called “leaky bucket” hypothesis written about by the famous Yale economist Arthur Okun in the 1970s). This SDN follows up the previous SDN on inequality and growth by focusing on the role of redistribution. It finds that, from the perspective of the best available macroeconomic data, there is not a lot of evidence that redistribution has in fact undercut economic growth (except in extreme cases). One should be careful not to assume therefore—as Okun and others have—that there is a big tradeoff between redistribution and growth. The best available macroeconomic data do not support such a conclusion.
There is a growing debate on the relative merits of universal and targeted social assistance transfers in achieving income redistribution objectives. While the benefits of targeting are clear, i.e., a larger poverty impact for a given transfer budget or lower fiscal cost for a given poverty impact, in practice targeting also comes with various costs, including incentive, administrative, social and political costs. The appropriate balance between targeted and universal transfers will therefore depend on how countries decide to trade-off these costs and benefits as well as on the potential for redistribution through taxes. This paper discusses the trade-offs that arise in different country contexts and the potential for strengthening fiscal redistribution in advanced and developing countries, including through expanding transfer coverage and progressive tax financing.
Based on the findings of a commission chaired by James Mirrlees, this volume presents a coherent picture of tax reform whose aim is to identify the characteristics of a good tax system for any open developed economy, assess the extent to which the UK tax system conforms to these ideals, and recommend how it might be reformed in that direction.