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Essays on Optimal Income Taxation
Linnaeus University, School of Business and Economics, Department of Economics and Statistics (NS).
2024 (English)Doctoral thesis, monograph (Other academic)
Abstract [en]

This thesis consists of three separate papers on optimal income taxation and redistribution. 

In the first paper, Tagging Birthplace for Optimal Tax Policy, Redistribution, and Welfare, I study the design of optimal tax policy based on individual's birthplace. 

Using Swedish population register data and numerical simulations, I examine the relationship between regional origin and optimal tax policy for income redistribution. 

By aggregating birthplaces into four regions based on population size, I find higher optimal marginal tax rates for individuals born in larger cities and areas relative to their less populous counterparts. Moreover, average tax rates are lower for those born in less populated areas, further underscoring interregional redistributive efforts. Importantly, I emphasize that tagging individuals based on their place of birth facilitates more targeted tax policies, leading to substantial welfare gains. 

The second paper, Optimal Redistribution and Long-Term Unemployment, extends the theory of optimal redistributive taxation to address the dynamics of long-term unemployment. We analyze the interplay of education policy, public employment initiatives, unemployment benefits, and income taxation to achieve redistributive goals while addressing the challenges of unemployment. Our findings highlight the need for overprovision of education and expansion of public employment programs, alongside targeted redistribution, to mitigate long- term unemployment. Policy simulations demonstrate the adaptability of this approach to different preferences and productivity differentials. We emphasize the importance of taking long-term unemployment into account when designing effective redistributive policies. 

The third paper, Taxation of Housing In A Mirrleesian Context When Urban Land Is Scarce, investigates the optimal taxation of housing in a Mirrleesian framework, taking into account heterogeneity among agents in labor productivity, land ownership, and location (urban or rural). We distinguish between land, which is scarce in urban areas, and structures, which require maintenance that can be done at home or purchased. Calibration to Swedish register data reveals significant welfare gains from housing taxes, especially when distinguishing between urban and rural areas and between structures and land. We justify housing taxes by capturing land rent, a source of inequality. We find that taxing structures is justified if one is constrained from taxing land rent, as scarcity spills over to structures via zoning constraints. In rural areas, property taxes should be low or negative, given regional redistribution concerns. Subsidizing professional maintenance services is advisable to optimize time allocation and mitigate income tax distortions. Our analysis shows indirect distributional effects of structure and maintenance taxes on urban land prices, which influence the direct effects of taxation. 

Place, publisher, year, edition, pages
Växjö: Linnaeus University Press, 2024. , p. ca 185
Series
Linnaeus University Dissertations ; 523
Keywords [en]
Optimal income taxation, tagging, housing, long-term unemployment, education.
National Category
Economics
Research subject
Economy, Economics
Identifiers
URN: urn:nbn:se:lnu:diva-129548DOI: 10.15626/LUD.523.2024ISBN: 9789180821537 (print)ISBN: 9789180821544 (electronic)OAI: oai:DiVA.org:lnu-129548DiVA, id: diva2:1860330
Public defence
2024-05-30, Weber, Växjö, 10:00 (English)
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Available from: 2024-05-24 Created: 2024-05-23 Last updated: 2024-05-24Bibliographically approved

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Tayibov, Khayyam

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