Taxation and regulation of bonus pay

Besley, Timothy and Ghatak, Maitreesh (2011) Taxation and regulation of bonus pay. Economic Organisation and Public Policy Discussion Papers, EOPP 030. The London School of Economics and Political Science, Suntory and Toyota International Centres for Economics and Related Disciplines, London, UK.

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Abstract

We explore the consequence for taxation and regulation of bonus pay when investors are protected by taxpayers from downside risk. The paper develops a model where workers in financial sector firms make decisions about effort and risktaking which are influenced by the structure of bonus pay. Bailouts lead to too little effort, too much risk-taking and increase inequality. We show that the optimal structure of bonuses can be implemented by a combination of a regulation on the structure of bonuses and a tax on their level.

Item Type:	Monograph (Technical Report)
Official URL:	http://sticerd.lse.ac.uk/
Additional Information:	© 2011 The Authors
Library of Congress subject classification:	H Social Sciences > HB Economic Theory
Sets:	Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Identification Number:	EOPP 030
Date Deposited:	24 Jul 2014 08:23
URL:	http://eprints.lse.ac.uk/58192/

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