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Welfare Gains Of Age-Related Optimal Income Taxation
Uppsala University.
Uppsala University.
University of Milan, Italy.
2013 (English)In: International Economic Review, ISSN 0020-6598, E-ISSN 1468-2354, Vol. 54, no 4, p. 1219-1249Article in journal (Refereed) Published
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Abstract [en]

Using an overlapping generations model with skill uncertainty and private savings, we quantify the gains of age-dependent labor income taxation. The total steady-state welfare gain of switching from age-independent to age-dependent nonlinear taxation varies between 2.4% and 4% of GDP. Part of the gain descends from relaxing incentive-compatibility constraints and part is due to capital-accumulation effects. The welfare gain is of about the same magnitude as that which can be achieved by moving from linear to nonlinear income taxation. Finally, the welfare loss from tax-exempting interest income is negligible under an optimal age-dependent labor income tax.

Place, publisher, year, edition, pages
2013. Vol. 54, no 4, p. 1219-1249
National Category
Economics and Business
Research subject
Social Sciences; Economy
Identifiers
URN: urn:nbn:se:lnu:diva-51252DOI: 10.1111/iere.12034ISI: 000326107700007OAI: oai:DiVA.org:lnu-51252DiVA, id: diva2:913803
Available from: 2013-11-27 Created: 2016-03-22 Last updated: 2017-11-30Bibliographically approved

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Bastani, Spencer

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