G2TT
来源类型Discussion paper
规范类型论文
来源IDDP14648
DP14648 Redistribution with Performance Pay
Nicolas Werquin; Pawel Doligalski; Abdoulaye Ndiaye
发表日期2022-04-23
出版年2022
语种英语
摘要Half of the jobs in the U.S. feature pay-for-performance. We derive novel incidence and optimum formulas for the overall rate of tax progressivity and the top tax rates on total earnings and bonuses, when such labor contracts arise from moral hazard frictions within firms. Optimal taxes account for the fiscal externalities and welfare consequences of two distinct forces: a direct crowding-out of private insurance and a countervailing crowding-in due to endogenous labor effort responses. These imply that the amount of pre-tax earnings risk to which the worker is exposed is roughly invariant to tax progressivity, whereas the (adverse) welfare consequences of the crowd-out outweigh those of the crowd-in. Quantitatively, the optimal tax policy with performance-pay contracts is close to that prescribed by standard models that treat pre-tax earnings risk as exogenous. Finally, we uncover an efficiency-based argument for taxing bonuses at strictly lower rates than base earnings.Half of the jobs in the U.S.~feature pay-for-performance. We derive novel incidence and optimum formulas for the overall rate of tax progressivity and the top tax rates on total earnings and bonuses, when such labor contracts arise from moral hazard frictions within firms. Optimal taxes account for the fiscal externalities and welfare consequences of two distinct forces: a direct crowding-out of private insurance and a countervailing crowding-in due to endogenous labor effort responses. These imply that the amount of pre-tax earnings risk to which the worker is exposed is roughly invariant to tax progressivity, whereas the (adverse) welfare consequences of the crowd-out outweigh those of the crowd-in. Quantitatively, the optimal tax policy with performance-pay contracts is close to that prescribed by standard models that treat pre-tax earnings risk as exogenous. Finally, we uncover an efficiency-based argument for taxing bonuses at strictly lower rates than base earnings.
主题Public Economics
关键词Performance pay Moral hazard Endogenous wages Optimal taxation Social insurance Bonus taxes
URLhttps://cepr.org/publications/dp14648-1
来源智库Centre for Economic Policy Research (United Kingdom)
资源类型智库出版物
条目标识符http://119.78.100.153/handle/2XGU8XDN/546245
推荐引用方式
GB/T 7714
Nicolas Werquin,Pawel Doligalski,Abdoulaye Ndiaye. DP14648 Redistribution with Performance Pay. 2022.
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