The Inefficiency of Unemployment: The Supervision Perspective
Quarterly Journal of Economics
1985
We study an example economy with costly labor monitoring under a wage-cum-supervision arrangement, where workers' utilities are not equalized across sectors (workers are identical to each other). Our main task is to look for (and find) a set of "flat" taxes and subsidies that bring about a Pareto improvement over the laissez-faire solution. We show that any of such welfare-improving schemes involves a tax on labor income from those workers whose utility is the lowest.
- DOI
- 10.2307/1885387
- Volume
- 100 (2)
- Pages
- 373
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- Sources
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