Low Wages, High Wages, and Taxes. There are two categories of
people: those that receive high nominal wages and those that
receive low nominal wages. Denote these two nominal wages as WH
(high wages) and WL (low wages), respectively, and WH > WL .
The utility function for each person, regardless of the nominal
wage he/she receives, is identical: u (c,l) =lnc +lnl , in which,
exactly as in Chapter 2, c stands for consumption and l stands for
leisure....