ETD

• Avanzati
• capital
• extensive margin
• heterogeneity
• heterogeneous agents
• income
• indivisible labor
• labor
• Mirrlees
• Renström
• skills
• tax
• taxation
• wealth

This thesis studies optimal taxation in a small open economy with indivisible labor on the extensive margin, within a Mirrleesian framework. After a brief introduction highlighting the non-standard implications of applying the Mirrleesian approach to labor income taxation with indivisible labor, the thesis develops a one-period general equilibrium model with heterogeneous agents in skills and wealth endowments. Fiscal policy implements a fixed universal benefit ensuring a minimum consumption level, a capital income tax, and a labor income tax schedule. Agents can invest wealth either in the productive capital of the domestic representative firm or abroad to avoid domestic capital income taxation, implying a no-arbitrage condition in the capital market. The analysis examines taxation effects on factor prices, aggregate labor supply, capital mobility, and tax bases, and concludes that the optimal capital income tax can be different from zero, highlighting a trade-off between capital and labor income taxation.