Scandinavian Working Papers in Economics
Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy
No 2025:19: Redistribution and labor market inclusion
Thomas Aronsson (), Spencer Bastani () and Khayyam Tayibov ()
Additional contact information
Thomas Aronsson: Department of Economics, Umeå School of Business, Economics and Statistics, Umeå University, Department of Economics, University of Graz
Spencer Bastani: Department of Economics, Uppsala University; Research Institute for Industrial Economics (IFN) Uppsala Center for Fiscal Studies (UCFS), Uppsala Center for Labor Studies (UCLS)
Khayyam Tayibov: Department of Economics and Statistics, School of Business and Economics, Linnaeus University
Abstract: his paper incorporates labor market inactivity and long-term unemployment into the framework of optimal redistributive taxation. We examine how a combination of education policy, public employment programs, unemployment benefits, and optimal income taxation can effectively address both redistributive goals and the persistent challenges of long-term unemployment. Our analysis shows that the second-best optimal policy typically implies overprovision of education compared to a policy rule that reflects only direct marginal benefits and costs. At the same time, public employment programs and unemployment benefits tend to be underprovided. Through numerical simulations, we illustrate how this policy mix adapts to varying preferences for redistribution, productivity disparities, and the proportion of individuals at risk of long-term unemployment.
Keywords: long-term unemployment; education; optimal income taxation; pub lic sector employment
Language: English
45 pages, October 15, 2025
Full text files
wp-2025-19-redistrib...market-inclusion.pdfFull text
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