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Outsourcing and optimal nonlinear taxation: a note

CESifo München
Publication Date
  • H21
  • H25
  • J31
  • J62
  • Ddc:330
  • Outsourcing
  • Optimal Nonlinear Taxation
  • Outsourcing
  • Optimale Besteuerung
  • Körperschaftsteuer
  • Lohnstruktur
  • Arbeitsmobilität
  • Theorie
  • Political Science


This paper addresses outsourcing in the two-type optimal income tax model. If the government is able to control outsourcing via a direct tax instrument, outsourcing will not affect the marginal income tax structure. In the absence of a direct tax instrument, and under the plausible assumption that higher outsourcing increases the wage differential, the government will implement a lower marginal income tax rate for the low-ability type and a higher marginal income tax rate for the high-ability type than it would otherwise have done.

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