@TechReport{iza:izadps:dp4837,
            	author={Jacquet, Laurence and Lehmann, Etienne and Linden, Bruno Van der},
            	title={Optimal Redistributive Taxation with Both Extensive and Intensive Responses},
            	year={2010},
	month={Mar},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={4837},
            	url={https://www.iza.org/publications/dp4837},
	abstract={This paper characterizes optimal income taxation when individuals respond along both the intensive and extensive margins. Individuals are heterogeneous across two dimensions: specifically, their skill and disutility of participation. Preferences over consumption and work effort can differ with respect to the level of skill, with only the Spence-Mirrlees condition imposed. Employing a tax perturbation approach, we derive an optimal tax formula that generalizes previous results by allowing for income effects and extensive margin responses. We provide a sufficient condition for optimal marginal tax rates to be nonnegative everywhere. We discuss the relevance of this condition with analytical examples and numerical simulations using U.S. data.},
	keywords={optimal tax formula;tax perturbation;random participation},
            }