This study explores the optimal taxation of participation within a monopolistically competitive product market that exhibits increasing markups. Individual labor supply responds along both intensive and extensive margins. The government simultaneously optimizes a nonlinear Mirrleesian income tax scheme, a flat profit tax rate, and a flat unemployment benefit. It is shown analytically that the monetized welfare cost of an increase in unemployment benefit is higher under monopolistic competition compared to under perfect competition. Nevertheless, numerical simulations suggest that the optimal unemployment benefit increases in response to greater markups when the government simultaneously optimizes all of its tools. The reason is that, along with a higher profit tax, rising markups require a decline in marginal income taxes. Lower marginal income taxes relieve the extensive margin distortions and accommodate an increase in the unemployment benefit. Accordingly, optimal nominal participation taxes remain approximately unchanged for the lower half of the ability distribution. For the upper half, the decline in income taxes outweighs the increase in the unemployment benefit, leading to lower optimal nominal participation taxes.

中文翻译：

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垄断竞争、加价上涨和参与的最优税收

本研究探讨了在加价不断增加的垄断竞争产品市场中参与的最佳税收。个体劳动力供给沿着集约边际和粗放边际做出反应。政府同时优化非线性米尔利斯所得税计划、统一利润税率和统一失业救济金。分析表明，垄断竞争下失业救济金增加的货币化福利成本高于完全竞争下的货币化福利成本。然而，数值模拟表明，当政府同时优化所有工具时，最佳失业救济金会随着加价的增加而增加。原因是，随着利润税的提高，加价的上升需要边际所得税的下降。较低的边际所得税缓解了广泛的边际扭曲，并适应了失业救济金的增加。因此，对于能力分布的下半部分，最优名义参与税大致保持不变。对于上半部分来说，所得税的下降超过了失业救济金的增加，导致最优名义参与税降低。