TAXATION, REDISTRIBUTION AND FRICTIONAL LABOR SUPPLY – HAKKI YAZICI


Assistant Professor Hakkı Yazıcı from Sabancı University gave a talk as part of our weekly seminar series on December 21, 2018. In this presentation, Doctor Yazıcı provided us with an analysis of his model towards understanding optimal taxation strategies in the presence of labor market frictions accompanied with career ladders. He concluded the talk with an investigation into US labor market. We would like to thank Doctor Yazıcı for this very important discussion and wish him great success in his future studies. Below, you can find the abstract of his paper.

Abstract: We analyze the implications of ex ante dispersion in worker talents and a frictional labor market for the design of tax and benefit systems. Our model features on and off the job search, job ladders and equilibrium income and profit dispersion within talent markets. In a baseline setting with no talent dispersion, the optimal system consists of an unemployment benefit financed out of a simple lump sum tax on workers. The benefit is high enough to suppress worker income and firm profit dispersion, deter worker poaching and collapse job ladders. With talent dispersion, high benefit levels drive less talented workers out of the market and are prohibitively costly. Active talent markets are frictional. Taxes impact the dispersion of worker incomes and firm profits within these markets. These effects shape and modify conventional optimal tax formulas.

 

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