%0 Report
        %A Jacquet, Laurence
%A Lehmann, Etienne
%A Linden, Bruno Van der
        %T Optimal Redistributive Taxation with Both Extensive and Intensive Responses
        %D 2010
        %8 2010 Mar
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 4837
        %U https://www.iza.org/publications/dp4837
        %X 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.
        %K optimal tax formula
%K tax perturbation
%K random participation