Work

Optimal Dynamic Taxes

Year: 2011

Type: report

Abstract: We study optimal labor and savings distortions in a lifecycle model with idiosyncratic shocks.We show a tight connection between its recursive formulation and a static Mirrlees model with two goods, which allows us to derive elasticity-based expressions for the dynamic optimal distortions.We derive a generalization of a savings distortion for non-separable preferences and show that, under certain conditions, the labor wedge tends to zero for sufficiently high skills.We estimate skill distributions using individual data on the U.S. taxes and labor incomes.Computed optimal distortions decrease for sufficiently high incomes and increase with age.

Source: National Bureau of Economic Research

DOI: 10.3386/w17642

Authors: Mikhail Golosov, Maxim Troshkin, Aleh Tsyvinski

Institutions: Boston University, National Bureau of Economic Research, Princeton University, Cornell University, Yale University, University of California San Diego, Bank of Japan, New York University, Federal Reserve Bank of Chicago

Language: English

Topic: Economic and Fiscal Studies

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

Funders: National Science Foundation, John Simon Guggenheim Memorial Foundation, Einaudi Institute for Economics and Finance

OpenAlex ID: W2135477100

Cites: 51

Cited by: 62

Related to: 10