Optimal Income Taxation: Mirrlees Meets Ramsey
|
|
- Kimberly Boone
- 8 years ago
- Views:
Transcription
1 Optimal Income Taxation: Mirrlees Meets Ramsey Jonathan Heathcote FRB Minneapolis Hitoshi Tsujiyama Goethe University Frankfurt Ohio State University, April
2 The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System
3 How should we tax income? What structure of labor income taxation offers best trade-off between benefits of public insurance and costs of distortionary taxes? Systems currently in place combine: Tax rates that increase with income Transfers that decline with income Proposals for a flat tax system with universal transfers Friedman (1962) Mirrlees (1971)
4 This Paper We compare 3 tax and transfer systems: 1. Affine tax system: T (y) = τ 0 + τ 1 y constant marginal rates with lump-sum transfers 2. HSV tax system: T (y) = y λy 1 τ increasing marginal rates without transfers 3. Optimal tax system fully non-linear
5 Main Findings Best tax and transfer system in the HSV class better than the best affine tax system More valuable to have marginal tax rates increase with income than to have lump-sum transfers Welfare gains moving from the current tax system to the optimal one are tiny
6 Mirrlees Approach to Tax Design: Mirrlees (1971), Diamond (1988), Saez (2001) Planner only observes earnings = productivity effort Think of planner choosing earnings x and cons. c for each unobservable productivity type α Include incentive constraints, s.t. each type prefers the earnings level intended for their type Allocations are constrained efficient Trace out tax decentralization T(x(α)) = x(α) c(α)
7 Novel Elements of Our Analysis 1. Our model has a distinct role for private insurance Standard decentralization of efficient allocations delivers all insurance through tax system Very progressive taxes 2. We use a SWF that rationalizes amount of redistribution embedded in observed tax system Analyzes typically assume utilitarian social welfare function Strong desire for redistribution 3. Explore whether simple Ramsey-style tax functions can come close to decentralizing efficient allocations Affine tax function HSV tax function
8 Static environment Environment 1 Heterogeneous individual labor productivity w Log productivity is sum of two independent stochastic components α no private insurance ε private insurance log w = α + ε planner sees neither component of productivity (later introduce a third productivity component κ that the planner can observe)
9 Environment 2 Common preferences u(c, h) = log(c) h1+σ 1 + σ Production linear in aggregate effective hours exp(α + ε)h(α, ε)df α df ε = c(α, ε)df α df ε + G
10 Planner s Problems Seeks to maximize SWF denoted W(α, ε) Takes G as given Takes private insurance for ε as given Only observes total income y = earnings plus private insurance income taxes must be based on income Think of planner as choosing consumption and income for each private type (α, ε) Include incentive constraints s.t. each private type (α, ε) prefers the income level intended for their type
11 Timeline 1. First Stage Planner offers menu of contracts {c( α, ε), y( α, ε)} Agents draw idiosyncratic α and report α 2. Second Stage Agents buy private insurance against insurable shock ε Draw ε, receive insurance payments and report ε Work sufficient hours to deliver y( α, ε) Receive consumption c( α, ε)
12 Limitations of Our Analysis 1. We abstract from life-cycle uninsurable shocks Farhi and Werning, 2010; Golosov, Troshkin and Tsyvinkski We abstract from distortions to skill investment Heathcote, Storesletten and Violante, 2013; Guvenen, Kuruscu and Ozkan, 2012; Krueger and Ludwig, 2013
13 First result: Cannot condition on ε Offered contracts take the form {c( α), y( α)} Private insurance markets utility cost of delivering resources independent of ε undercuts planner s ability to condition allocations on ε Planner cannot take over private insurance Distinct roles for public and private insurance Note: if ε were observable, public insurance would be better than private
14 Planner s Problem: Second Best max c(α),y(α) s.t. W(α)U(α, α)dfα y(α)dfα c(α)df α + G U(α, α) U(α, α) α, α where U(α, α) max h(ε),b(ε) s.t. { } log c( α) h(ε;α, α)1+σ 1+σ df ε Q(ε)B(ε; α, α)dε = 0 exp(α + ε)h(ε; α, α) + B(ε; α, α) = y( α) ε price of insurance E Q(ε)dε = E df ε
15 Planner s Problem: Second Best Substituting the solution to the second problem into the first { ( ) } 1+σ W(α) log c(α) Ω y(α) exp(α) df α max c(α),y(α) subject to y(α)dfα c(α)df α + G ( ) 1+σ ( 1+σ log c(α) Ω y(α) exp(α) log c( α) Ω y(ã) exp(α)) α ( exp(ε) 1+σ σ df ε ) σ where Ω 1+σ Standard Mirrlees Problem Solution can be decentralized with income (consumption) taxes
16 Planner s Problem: Ramsey max τ s.t. W(α) { u(c(α, ε), h(α, ε))dfε } dfα y(α, ε)dfα df ε c(α, ε)df α df ε + G where c(α, ε) and h(α, ε) are the solutions to { } max log(c(α, ε)) h(α,ε)1+σ 1+σ df ε c(α,ε),h(α,ε),b(α,ε) s.t. Q(ε)B(α, ε)dε = 0 c(α, ε) y(α, ε) T(y(α, ε); τ) ε where y(α, ε) exp(α + ε)h(α, ε) + B(α, ε)
17 Baseline Tax System Assume the current US tax / transfer system is given by T (y; λ, τ) = y λy 1 τ Functional form introduced by Feldstein (1969), Persson (1983), and Benabou (2000) Closely approximates US tax & transfer system (Heathcote, Storesletten, and Violante, 2014) τ indexes progressivity of the tax system
18 Fit of HSV Tax Function Log of post government income Log of pre government income Estimated on PSID data for Households with head / spouse hours 260 per year Estimated value for τ = 0.151, R 2 = 0.96
19 Social Welfare Want to compare welfare under US tax scheme just described to various alternatives What SWF should we use for this comparison? Our view: current tax system embeds particular social preference for redistribution What taste for redistribution is consistent with observed progressivity (τ = 0.151)?
20 Social Welfare Assume SWF takes the form W(α) = exp( θα) θ controls taste for redistribution (e.g. θ = 0 : utilitarian) Assume US govt choosing a tax system in HSV class T (y) = y λy 1 τ What value for θ rationalizes observed choice for τ? Empirically-Motivated SWF: θ US that solves τ (θ US ) = τ US
21 Social Welfare In general, solve for θ US numerically Special case: If F s are normal then { } θ US = (1 τ US ) v α 1+σ (1 g US )(1 τ US ) 1 θ is increasing in τ and g θ is decreasing in v α and σ As σ, if θ = θ US, then τ US delivers first best Use θ US as baseline for welfare comparisons focus on relative efficiency of alternative tax systems
22 Calibration Frisch elasticity = 0.5 σ = 2 Progressivity parameter τ = (HSV 2014) Govt spending G s.t. G/Y = (US, 2005) var(ε) = 0.193: estimated variance of insurable shocks (HSV 2013) var(α) = 0.273: total variance of wages is 0.466
23 Wage Distribution Heavy right tail of labor earnings distribution, well-approximated by Pareto distribution (Saez, 2001) Assume Pareto tail reflects uninsurable wage dispersion F α : Exponentially Modified Gaussian EMG(µ, σ 2, a) α is the sum of independent Normal and Exponential random variables F ε : Normal N( vε 2, v ε) log(w) = α + ε is itself EMG w is Pareto-Lognormal log(wh) is also EMG, given our utility function, market structure, and HSV tax system
24 Distribution for α Density (log scale) Data (SCF 2007) NORMAL EMG Log Labor Income Use micro data from the 2007 SCF to estimate α by maximum likelihood a = 2.2
25 Numerical Implementation Maintain continuous distribution for ε Assume a discrete distribution for α Baseline: 10,000 evenly-spaced grid points α min : $5 per hour (12% of the average = $41.56) α max : $3,075 per hour ($6.17m assuming 2,000 hours = 99.99th percentile of SCF earnings distn.) Set µ and σ 2 to match E [e α ] = 1 and target for var(α) given a = 2.2
26 Wage Distribution x Density Hourly Wages
27 Social Welfare Function Relative Pareto Weight exp(alpha)
28 Quantitative Analysis Focus on four cases: 1. HSV tax function: T (y) = y λy 1 τ 2. Affine tax function: T (y) = τ 0 + τ 1 y 3. Cubic tax function: T (y) = τ 0 + τ 1 y + τ 2 y 2 + τ 3 y 3 4. Mirrless tax function (second best allocation)
29 Quantitative Analysis: Benchmark Tax System Tax Parameters Outcomes welfare Y mar. tax TR/Y HSV US λ τ Affine τ τ Cubic τ τ τ τ Mirrlees
30 Quantitative Analysis: Benchmark Moving to affine tax system is walfare reducing Increasing marginal rates more important than lump-sum transfers Moving to fully optimal system generates only tiny gains (0.1%) The optimal marginal tax rate is around 30% Almost no need for transfers
31 HSV Tax Function Log Consumption Mirrlees Ramsey Hours Worked alpha alpha Marginal Tax Rate alpha Average Tax Rate alpha
32 Affine Tax Function Log Consumption Mirrlees Ramsey Hours Worked alpha alpha Marginal Tax Rate alpha Average Tax Rate alpha
33 Cubic Tax Function Log Consumption Mirrlees Ramsey Hours Worked alpha alpha Marginal Tax Rate alpha Average Tax Rate alpha
34 Quantitative Analysis: Sensitivity What drives the results? 1. Empirically-motivated SWF Utilitarian SWF: θ = 0 2. Eliminate insurable shocks: ṽ α = v α + v ε and ṽ ε = 0 3. Wage distribution has thin Log-Normal right tail: α LN
35 Sensitivity: Utilitarian SWF Utilitarian SWF stronger taste for redistribution Want higher tax rates and larger transfers Optimal HSV still better than optimal affine Tax System Tax Parameters Outcomes welfare Y mar. tax TR/Y HSV US λ : τ : HSV λ : τ : Affine τ 0 : τ 1 : Mirrlees
36 Sensitivity: No Insurable Shocks No insurable shocks larger role for public redistribution Want higher tax rates and larger transfers Optimal HSV still better than optimal affine Tax System Tax Parameters Outcomes welfare Y mar. tax TR/Y HSV US λ : τ : HSV λ : τ : Affine τ 0 : τ 1 : Mirrlees Utilitarian SWF + No insurable shocks Lump-sum transfers more important Optimal HSV worse than optimal affine
37 Sensitivity: Log-Normal Wage Log-normal distribution thin right tail Optimal HSV worse than optimal affine Optimal affine nearly efficient Tax System Tax Parameters Outcomes welfare Y mar. tax TR/Y HSV US λ : τ : HSV λ : τ : Affine τ 0 : τ 1 : Mirrlees
38 Why Distribution Shape Matters Want high marginal rates at the top when (i) few agents face those marginal rates, but (ii) can capture lots of revenue from higher-income households Benchmark Log-normal 0.8 Coefficient (1-F(y))/(yf(y)) Income y
39 Efficient Marginal Tax Rates: Sensitivity 0.6 Benchmark Utilitarian No Insurable Shocks Log-Normal 0.5 Marginal Tax Rate alpha
40 Extension: Coarse Grid Coarse grid Mirrlees Planner can do much better Gives Mirrlees planner too much power if true distribution continuous # of grid points Welfare (relative to HSV) Affine Mirrlees First Best , , ,
41 Extension: Coarse Grid grids 10 2 grids 10 3 grids 10 4 grids 10 5 grids Marginal Tax Rate alpha
42 Extension: Type-Contingent Taxes Productivity partially reflects observable characteristics (e.g. education, age, gender) Some fraction of uninsurable shocks are observable: α α + κ Heathcote, Perri & Violante (2010) estimate variance of cross-sectional wage dispersion attributable to observables, v κ = Planner should condition taxes on observables: T(y; κ) Consider two-point distribution for κ (college vs high school)
43 Extension: Type-Contingent Taxes Significant welfare gains relative to non-contingent tax Conditioning on observables marginal tax rates of 20% System Outcomes wel. Y mar. TR/Y HSV US λ : 0.827,τ : HSV λ L : 0.988, τ L : λ H : 0.694, τ H : Affine τ L 0 : 0.140, τ L 1: τ H 0 : 0.095, τ H 1 : Mirrlees
44 Conclusions Moving from current HSV system to optimal affine system is welfare reducing Increasing marginal rates more important than lump-sum transfers Moving from current HSV system to fully optimal system generates tiny welfare gains Ramsey and Mirrlees tax schemes not far apart: can approximately decentralize SB with a simple tax scheme Important to measure the gap in terms of allocations and welfare, not in terms of marginal tax rates Want to condition both transfers and tax rates on observables
How To Find Out If A Tax System Is More Efficient
Optimal Income Taxation: Mirrlees Meets Ramsey Jonathan Heathcote FRB Minneapolis Hitoshi Tsujiyama Goethe University Frankfurt Iowa State University, April 2014 The views expressed herein are those of
More informationResearch Division Federal Reserve Bank of St. Louis Working Paper Series
Research Division Federal Reserve Bank of St. Louis Working Paper Series Taxing Top Earners: A Human Capital Perspective Alejandro Badel and Mark Huggett Working Paper 2014-017B http://research.stlouisfed.org/wp/2014/2014-017.pdf
More informationOn the Consequences of Eliminating Capital Tax Differentials
On the Consequences of Eliminating Capital Tax Differentials Ctirad Slavík and Hakki Yazici February 19, 2014 Abstract In the United States structure and equipment capital are effectively taxed at different
More informationOn the Consequences of Eliminating Capital Tax Differentials
On the Consequences of Eliminating Capital Tax Differentials Ctirad Slavík and Hakki Yazici July 21, 2014 Abstract In the United States structure and equipment capital are effectively taxed at different
More informationNew Dynamic Public Finance. Mikhail Golosov (Yale, New Economic School, and NBER) Aleh Tsyvinski (Yale, New Economic School, and NBER)
New Dynamic Public Finance Mikhail Golosov (Yale, New Economic School, and NBER) Aleh Tsyvinski (Yale, New Economic School, and NBER) New Dynamic Public Finance is a recent literature that analyzes taxation
More informationInsurance and Opportunities: The Welfare Implications of Rising Wage Dispersion
JOINT USC ECONOMICS DEPARTMENT SEMINAR IN ECONOMICS DYNAMICS and USC FBE DEPT MACROECONOMICS AND INTERNATIONAL FINANCE WORKSHOP presented by Gianluca Violante FRIDAY, April 14, 006 3:30 pm - 5:00 pm, Room:
More informationInsurance and Opportunities: The Welfare Implications of Rising Wage Dispersion
Insurance and Opportunities: The Welfare Implications of Rising Wage Dispersion Jonathan Heathcote, Kjetil Storesletten, and Giovanni L. Violante February 005 Abstract This paper analyzes the welfare effects
More informationNBER WORKING PAPER SERIES TAX BUYOUTS. Marco Del Negro Fabrizio Perri Fabiano Schivardi. Working Paper 15847 http://www.nber.
NBER WORKING PAPER SERIES TAX BUYOUTS Marco Del Negro Fabrizio Perri Fabiano Schivardi Working Paper 15847 http://www.nber.org/papers/w15847 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue
More informationFederal Reserve Bank of New York Staff Reports
Federal Reserve Bank of New York Staff Reports Tax Buyouts Marco Del Negro Fabrizio Perri Fabiano Schivardi Staff Report no. 467 August 2010 This paper presents preliminary findings and is being distributed
More informationInsurance and Opportunities: A Welfare Analysis of Labor Market Risk
Insurance and Opportunities: A Welfare Analysis of Labor Market Risk Jonathan Heathcote a, Kjetil Storesletten b, Giovanni L. Violante c,d,e Received July 3, 006; Received in Revised Form May 3, 007 Abstract
More informationOptimal fiscal policy under commitment
Abstract Optimal Fiscal and Monetary Policy with Commitment Mikhail Golosov and Aleh Tsyvinski 1 May 31, 2006 Forthcoming in New Palgrave Dictionary of Economics and Law Optimal fiscal and monetary policy
More informationInsurance and Taxation over the Life Cycle
Insurance and Taxation over the Life Cycle EMMANUEL FARHI Harvard University IVÁN WERNING MIT August 202 Abstract We consider a dynamic Mirrlees economy in a life cycle context and study the optimal insurance
More informationOptimal Taxation in a Limited Commitment Economy
Optimal Taxation in a Limited Commitment Economy forthcoming in the Review of Economic Studies Yena Park University of Pennsylvania JOB MARKET PAPER Abstract This paper studies optimal Ramsey taxation
More informationTax Buyouts. Marco Del Negro Federal Reserve Bank of New York
Tax Buyouts Marco Del Negro Federal Reserve Bank of New York Fabrizio Perri University of Minnesota, Federal Reserve Bank of Minneapolis CEPR and NBER Fabiano Schivardi Universita di Cagliari, Einaudi
More informationIntermediate Macroeconomics: The Real Business Cycle Model
Intermediate Macroeconomics: The Real Business Cycle Model Eric Sims University of Notre Dame Fall 2012 1 Introduction Having developed an operational model of the economy, we want to ask ourselves the
More informationInsurance and Opportunities: The Welfare Implications of Rising Wage Dispersion
Insurance and Opportunities: The Welfare Implications of Rising Wage Dispersion Jonathan Heathcote, Kjetil Storesletten, and Giovanni L. Violante June 006 Abstract This paper provides an analytical characterization
More informationOptimal Age Specific Income Taxation
Optimal Age Specific Income Taxation Jean-Marie Lozachmeur 1 October, 2005 1 GREMAQ, University of Toulouse. Mailing: Gremaq, 21 Allée de Brienne F- 31000 Toulouse. E-mail: jean-marie.lozachmeur@univ-tlse1.fr.
More informationOptimal Taxation in Theory and Practice
Optimal Taxation in Theory and Practice N. Gregory Mankiw, Matthew Weinzierl, and Danny Yagan N. Gregory Mankiw is Professor of Economics, Matthew Weinzierl is Assistant Professor of Business Administration,
More informationHigh Marginal Tax Rates on the Top 1%?
High Marginal Tax Rates on the Top 1%? Lessons from a Life Cycle Model with Idiosyncratic Income Risk Fabian Kindermann University of Bonn and Netspar Dirk Krueger University of Pennsylvania, CEPR, CFS,
More informationPaternalism vs Redistribution: Designing Retirement Savings Policies with Behavioral Agents
Paternalism vs Redistribution: Designing Retirement Savings Policies with Behavioral Agents Christian Moser Princeton University Pedro Olea de Souza e Silva Princeton University JOB MARKET PAPER December
More informationCollege Pricing and Income Inequality
College Pricing and Income Inequality Zhifeng Cai University of Minnesota Jonathan Heathcote Federal Reserve Bank of Minneapolis February 16, 2016 PRELIMINARY AND INCOMPLETE 1 Introduction Rising college
More informationTheoretical Tools of Public Economics. Part-2
Theoretical Tools of Public Economics Part-2 Previous Lecture Definitions and Properties Utility functions Marginal utility: positive (negative) if x is a good ( bad ) Diminishing marginal utility Indifferences
More informationChapter 3: The effect of taxation on behaviour. Alain Trannoy AMSE & EHESS
Chapter 3: The effect of taxation on behaviour Alain Trannoy AMSE & EHESS Introduction The most important empirical question for economics: the behavorial response to taxes Calibration of macro models
More informationSocial Insurance with Private Insurance Markets. 2 Social Insurance with Endogenous Private Insurance
Florian Scheuer 4/22/2014 Social Insurance with Private Insurance Markets 1 Overview in many insurance applications, public and private insurance co-exist even when private insurance markets may not be
More informationNotes on Papers on Public Debt & Dynamic Public Finance
Notes on Papers on Public Debt & Dynamic Public Finance Lucas-Stokey, JME 1983 Optimal public finance with stochastic G, allowing for rich structure of asset markets (including claims equivalent to statecontingent
More informationHuman Capital Risk, Contract Enforcement, and the Macroeconomy
Human Capital Risk, Contract Enforcement, and the Macroeconomy Tom Krebs University of Mannheim Moritz Kuhn University of Bonn Mark Wright UCLA and Chicago Fed General Issue: For many households (the young),
More informationSustainable Social Security: Four Options
Federal Reserve Bank of New York Staff Reports Sustainable Social Security: Four Options Sagiri Kitao Staff Report no. 505 July 2011 This paper presents preliminary findings and is being distributed to
More informationPareto Efficient Income Taxation with Stochastic Abilities
This revision October 2006 Pareto Efficient Income Taxation with Stochastic Abilities Abstract This paper studies Pareto efficientincometaxationinaneconomywithfinitely-lived individuals whose income generating
More informationOptimal Income Taxation with Multidimensional Types
1 Optimal Income Taxation with Multidimensional Types Kenneth L. Judd Hoover Institution NBER Che-Lin Su Northwestern University (Stanford Ph. D.) PRELIMINARY AND INCOMPLETE November, 2006 2 Introduction
More informationIs There Too Much Inequality in Health Spending Across Income Groups?
Is There Too Much Inequality in Health Spending Across Income Groups? Laurence Ales Carnegie Mellon University ales@cmu.edu Roozbeh Hosseini Arizona State University rhossein@asu.edu May 4, 214 Larry E.
More informationEmployment Protection and Business Cycles in Emerging Economies
Employment Protection and Business Cycles in Emerging Economies Ruy Lama IMF Carlos Urrutia ITAM August, 2011 Lama and Urrutia () Employment Protection August, 2011 1 / 38 Motivation Business cycles in
More informationLecture 3: Growth with Overlapping Generations (Acemoglu 2009, Chapter 9, adapted from Zilibotti)
Lecture 3: Growth with Overlapping Generations (Acemoglu 2009, Chapter 9, adapted from Zilibotti) Kjetil Storesletten September 10, 2013 Kjetil Storesletten () Lecture 3 September 10, 2013 1 / 44 Growth
More informationBehavioral responses to inheritance tax: Evidence from notches in France
Behavioral responses to inheritance tax: Evidence from notches in France Jonathan Goupille and Arturo Infante 12 février 2015 1 / 70 Motivation Wealth is strongly concentrated Wealth can be transmitted
More informationOn the Effects of Tax-deferred Saving Accounts
On the Effects of Tax-deferred Saving Accounts Anson T. Y. Ho Abstract This study investigates the quantitative impacts of tax-deferred saving accounts (TDAs) in a general equilibrium framework. These
More informationUNIVERSITY OF OSLO DEPARTMENT OF ECONOMICS
UNIVERSITY OF OSLO DEPARTMENT OF ECONOMICS Exam: ECON4310 Intertemporal macroeconomics Date of exam: Thursday, November 27, 2008 Grades are given: December 19, 2008 Time for exam: 09:00 a.m. 12:00 noon
More informationMoral Hazard. Itay Goldstein. Wharton School, University of Pennsylvania
Moral Hazard Itay Goldstein Wharton School, University of Pennsylvania 1 Principal-Agent Problem Basic problem in corporate finance: separation of ownership and control: o The owners of the firm are typically
More informationHealth Insurance Reform: The impact of a Medicare Buy-In
/ 41 Health Insurance Reform: The impact of a Medicare Buy-In Gary Hansen Minchung Hsu Junsang Lee 2011. 07. 13 GRIPS 2/ 41 Motivation Life-Cycle Model Calibration Quantitative Analysis Motivation Universal
More informationThe Life Insurance Demand in a Heterogeneous-Agent Life Cycle Economy
The Life Insurance Demand in a Heterogeneous-Agent Life Cycle Economy Department of Risk Management and Insurance Georgia State University October 6 th, 2010 Abstract A household s life insurance demand
More informationDeposit Insurance without Commitment by Russell Cooper and Hubert Kempf Discussion
Deposit Insurance without Commitment by Russell Cooper and Hubert Kempf Discussion Leopold von Thadden University of Mainz and ECB (on leave) Fiscal and Monetary Policy Challenges in the Short and Long
More informationEfficiency and Equity
Efficiency and Equity Lectures 1 and 2 Tresch (2008): Chapters 1, 4 Stiglitz (2000): Chapter 5 Connolly and Munro (1999): Chapter 3 Outline Equity, efficiency and their trade-off Social welfare function
More informationThe Taxable Income Elasticity and the Implications of Tax Evasion for Deadweight Loss. Jon Bakija, April 2011
The Taxable Income Elasticity and the Implications of Tax Evasion for Deadweight Loss Jon Bakija, April 2011 I. The Taxable Income Elasticity Literature Traditionally, the microeconometric literature on
More informationGains from Trade: The Role of Composition
Gains from Trade: The Role of Composition Wyatt Brooks University of Notre Dame Pau Pujolas McMaster University February, 2015 Abstract In this paper we use production and trade data to measure gains from
More informationWealth vs. Income Taxes in a Model of Credit Constraints and Inequality
Wealth vs. Income Taxes in a Model of Credit Constraints and Inequality Paul Shea Bates College July 13, 215 Abstract We compare the performance of net wealth and income taxes in a macroeconomic model
More informationFemale labor supply as insurance against idiosyncratic risk
Female labor supply as insurance against idiosyncratic risk Orazio Attanasio, University College London and IFS Hamish Low, University of Cambridge and IFS Virginia Sánchez-Marcos, Universidad de Cantabria
More informationStatistics in Retail Finance. Chapter 6: Behavioural models
Statistics in Retail Finance 1 Overview > So far we have focussed mainly on application scorecards. In this chapter we shall look at behavioural models. We shall cover the following topics:- Behavioural
More informationThe Provision of Public Universal Health Insurance: Impacts on Private Insurance, Asset Holdings and Welfare
The Provision of Public Universal Health Insurance: Impacts on Private Insurance, Asset Holdings and Welfare Minchung Hsu Junsang Lee GRIPS KDI November, 2011 Abstract This paper aims to investigate impacts
More informationSegmented Asset Markets and the Distribution of Wealth
Segmented Asset Markets and the Distribution of Wealth Aubhik Khan Ohio State University Heejeong Kim Ohio State University February 2015 ABSTRACT Using the 2004 Survey of Consumer Finances data, we find
More informationHow Much Consumption Insurance Beyond Self-Insurance? *
How Much Consumption Insurance Beyond Self-Insurance? * Greg Kaplan Federal Reserve Bank of Minneapolis, and University of Pennsylvania gregkaplan@nyu.edu Giovanni L. Violante New York University, CEPR,
More informationOn the Efficiency of Competitive Stock Markets Where Traders Have Diverse Information
Finance 400 A. Penati - G. Pennacchi Notes on On the Efficiency of Competitive Stock Markets Where Traders Have Diverse Information by Sanford Grossman This model shows how the heterogeneous information
More informationLONGEVITY AND ANNUITIES: AN INTRODUCTION
LONGEVITY AND ANNUITIES: AN INTRODUCTION HELMUTH CREMER Toulouse School of Economics (GREMAQ, IDEI, and Institut Universitaire de France) PIERRE PESTIEAU Université deliège and CORE For decades the debate
More informationQuantifying the Ine±ciency of the US Social Security System
Quantifying the Ine±ciency of the US Social Security System Mark Huggett and Juan Carlos Parra March 2, 2005 Abstract We quantify the ine±ciency of the retirement component of the US social security system
More informationOptimal Income Taxation with Adverse Selection in the Labor Market
Optimal Income Taxation with Adverse Selection in the Labor Market Stefanie Stantcheva Massachusetts Institute of Technology February 3rd, 2014 Abstract This paper studies optimal linear and nonlinear
More informationThe Elasticity of Taxable Income and the Implications of Tax Evasion for Deadweight Loss
The Elasticity of Taxable Income and the Implications of Tax Evasion for Deadweight Loss Jon Bakija, Williams College This draft: February 2014 Original draft: April 2011 I. The Elasticity of Taxable Income
More informationSHARING DEMOGRAPHIC RISK WHO IS AFRAID OF THE BABY BUST?
SHARING DEMOGRAPHIC RISK WHO IS AFRAID OF THE BABY BUST? Alexander Ludwig and Michael Reiter 166-28 Sharing Demographic Risk Who is Afraid of the Baby Bust? Alexander Ludwig Michael Reiter August 28 Abstract
More informationWelfare Costs of Inflation in a Menu Cost Model
Welfare Costs of Inflation in a Menu Cost Model Ariel Burstein and Christian Hellwig January 2008 Recent years have seen substantial progress in our understanding of pricing decisions at the micro level.
More informationReaching Universal Health Coverage. through Tax-based Financing Schemes: Challenges of Informal Economy and. Population Ageing
Reaching Universal Health Coverage through Tax-based Financing Schemes: Challenges of Informal Economy and Population Ageing Xianguo Huang ADissertation Submitted to the Faculty of the National Graduate
More informationHealth Insurance Reform: The impact of a Medicare Buy-In
Health Insurance Reform: The impact of a Medicare Buy-In Gary D Hansen Minchung Hsu Junsang Lee UCLA GRIPS KDI March 8, 2012 Abstract Current U.S. policy provides medical insurance in the form of Medicare
More informationThe Redistributive Benefits of Progressive Labor and Capital Income Taxation, or: How to Best Screw the Top 1%
The Redistributive Benefits of Progressive Labor and Capital Income Taxation, or: How to Best Screw the Top 1% Fabian Kindermann University of Würzburg and Netspar Dirk Krueger University of Pennsylvania,
More informationOn the Provision of Insurance Against Search-Induced Wage Fluctuations
On the Provision of Insurance Against Search-Induced Wage Fluctuations Jean-Baptiste Michau Ecole Polytechnique May 2013 Abstract This paper investigates the provision of insurance to workers against searchinduced
More informationReducing Government Debt in the Presence of Inequality
Reducing Government Debt in the Presence of Inequality Sigrid Röhrs and Christoph Winter February 4, 214 Abstract What are the welfare consequences of debt reduction policies? In this paper, we answer
More informationNotes on indifference curve analysis of the choice between leisure and labor, and the deadweight loss of taxation. Jon Bakija
Notes on indifference curve analysis of the choice between leisure and labor, and the deadweight loss of taxation Jon Bakija This example shows how to use a budget constraint and indifference curve diagram
More informationReforming the Tax System Lecture II: The Taxation of Savings. December 2015 Richard Blundell University College London
Econ 3007 Economic Policy Analysis Reforming the Tax System Lecture II: The Taxation of Savings December 205 Richard Blundell niversity ollege London Teaching Resources at: http://www.ucl.ac.uk/~uctp39a/lect.html
More informationReal Business Cycles. Federal Reserve Bank of Minneapolis Research Department Staff Report 370. February 2006. Ellen R. McGrattan
Federal Reserve Bank of Minneapolis Research Department Staff Report 370 February 2006 Real Business Cycles Ellen R. McGrattan Federal Reserve Bank of Minneapolis and University of Minnesota Abstract:
More informationThe Baby Boom and World War II: A Macroeconomic Analysis
The Baby Boom and World War II: A Macroeconomic Analysis Matthias Doepke, Moshe Hazan, and Yishay Maoz The baby boom started right after World War II. Is there a relation between the two? The Total Fertility
More informationCross-subsidization in employer-based health insurance and the effects of tax subsidy reform
Cross-subsidization in employer-based health insurance and the effects of tax subsidy reform Svetlana Pashchenko Ponpoje Porapakkarm Uppsala University University of Macau February 15, 2013 Abstract A
More informationIntergenerational Persistence of Earnings: The Role of Early and College Education
Intergenerational Persistence of Earnings: The Role of Early and College Education Diego Restuccia University of Toronto Carlos Urrutia Centro de Investigación Económica, ITAM Universidad Carlos III de
More informationLecture notes on Moral Hazard, i.e. the Hidden Action Principle-Agent Model
Lecture notes on Moral Hazard, i.e. the Hidden Action Principle-Agent Model Allan Collard-Wexler April 19, 2012 Co-Written with John Asker and Vasiliki Skreta 1 Reading for next week: Make Versus Buy in
More informationHealth Insurance Reform: The impact of a Medicare Buy-In
Health Insurance Reform: The impact of a Medicare Buy-In Gary D Hansen Minchung Hsu Junsang Lee UCLA GRIPS SKKU January 27, 2013 Abstract The steady state general equilibrium and welfare consequences of
More informationReducing Government Debt in the Presence of Inequality
Reducing Government Debt in the Presence of Inequality Sigrid Röhrs and Christoph Winter July 18, 2014 Abstract What are the welfare effects of government debt? In particular, what are the welfare consequences
More information3 Price Discrimination
Joe Chen 26 3 Price Discrimination There is no universally accepted definition for price discrimination (PD). In most cases, you may consider PD as: producers sell two units of the same physical good at
More informationThe RBC methodology also comes down to two principles:
Chapter 5 Real business cycles 5.1 Real business cycles The most well known paper in the Real Business Cycles (RBC) literature is Kydland and Prescott (1982). That paper introduces both a specific theory
More informationParameter and Model Uncertainties in Pricing Deep-deferred Annuities
Outline Parameter and Model Uncertainties in Pricing Deep-deferred Annuities Min Ji Towson University, Maryland, USA Rui Zhou University of Manitoba, Canada Longevity 11, Lyon, 2015 1/32 Outline Outline
More informationCross-subsidization in employer-based health insurance and the effects of tax subsidy reform
Cross-subsidization in employer-based health insurance and the effects of tax subsidy reform Svetlana Pashchenko Ponpoje Porapakkarm Uppsala University University of Macau May 8, 2013 Abstract A major
More informationUniversidad de Montevideo Macroeconomia II. The Ramsey-Cass-Koopmans Model
Universidad de Montevideo Macroeconomia II Danilo R. Trupkin Class Notes (very preliminar) The Ramsey-Cass-Koopmans Model 1 Introduction One shortcoming of the Solow model is that the saving rate is exogenous
More informationBailouts and Financial Innovation: Market Completion Versus Rent Extraction
Bailouts and Financial Innovation: Market Completion Versus Rent Extraction Anton Korinek University of Maryland Presentation at the Cowles GE Conference New Haven, CT April 2012 Anton Korinek (UMD) Bailouts
More informationThe Real Business Cycle Model
The Real Business Cycle Model Ester Faia Goethe University Frankfurt Nov 2015 Ester Faia (Goethe University Frankfurt) RBC Nov 2015 1 / 27 Introduction The RBC model explains the co-movements in the uctuations
More informationThomas Piketty Academic year 2014-2015
Public Economics: Tax & Transfer Policies (Master PPD & APE, Paris School of Economics) Thomas Piketty Academic year 2014-2015 Lecture 3: Externalities & corrective taxation: illustration with global warming
More informationFederal Reserve Bank of Chicago
Federal Reserve Bank of Chicago Human Capital Risk, Contract Enforcement, and the Macroeconomy Tom Krebs, Moritz Kuhn, and Mark L. J. Wright October 2014 WP 2014-09 Human Capital Risk, Contract Enforcement,
More informationOptimal Taxation with Permanent Employment Contracts
Optimal Taxation with Permanent Employment Contracts Pawe l Doligalski December 23, 2015 [most recent version] Abstract New Dynamic Public Finance describes the optimal income tax in an environment where
More informationThe Case for a Progressive Tax: From Basic Research to Policy Recommendations
The Case for a Progressive Tax: From Basic Research to Policy Recommendations Peter Diamond Emmanuel Saez CESIFO WORKING PAPER NO. 3548 CATEGORY 1: PUBLIC FINANCE AUGUST 2011 An electronic version of the
More informationNon-exclusive Dynamic Contracts, Competition, and the Limits of Insurance
Non-exclusive Dynamic Contracts, Competition, and the Limits of Insurance Laurence Ales Pricila Maziero Tepper School of Business Carnegie Mellon University The Wharton School University of Pennsylvania
More information3 The Standard Real Business Cycle (RBC) Model. Optimal growth model + Labor decisions
Franck Portier TSE Macro II 29-21 Chapter 3 Real Business Cycles 36 3 The Standard Real Business Cycle (RBC) Model Perfectly competitive economy Optimal growth model + Labor decisions 2 types of agents
More informationThe Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution
The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution N. Gregory Mankiw Matthew Weinzierl Working Paper 09-139 Copyright 2009 by N. Gregory Mankiw and Matthew Weinzierl Working
More informationVI. Real Business Cycles Models
VI. Real Business Cycles Models Introduction Business cycle research studies the causes and consequences of the recurrent expansions and contractions in aggregate economic activity that occur in most industrialized
More informationGraduate Macro Theory II: The Real Business Cycle Model
Graduate Macro Theory II: The Real Business Cycle Model Eric Sims University of Notre Dame Spring 2011 1 Introduction This note describes the canonical real business cycle model. A couple of classic references
More informationAsset Prices And Asset Quantities
Asset Prices And Asset Quantities Monika Piazzesi University of Chicago, CEPR and NBER Martin Schneider NYU and FRB Minneapolis October 2006 Abstract We propose an organizing framework that determines
More informationHARVARD JOHN M. OLIN CENTER FOR LAW, ECONOMICS, AND BUSINESS
HARVARD JOHN M. OLIN CENTER FOR LAW, ECONOMICS, AND BUSINESS ISSN 1045-6333 INCOME TAXATION AND OPTIMAL GOVERNMENT POLICY Louis Kaplow Discussion Paper No. 518 08/2005 Harvard Law School Cambridge, MA
More informationUnemployment Insurance Savings Accounts in a life-cycle model with job search
Unemployment Insurance Savings Accounts in a life-cycle model with job search Sijmen Duineveld University of Augsburg October 19, 2015 Abstract The differences between a traditional Unemployment Insurance
More informationVolatility, Productivity Correlations and Measures of. International Consumption Risk Sharing.
Volatility, Productivity Correlations and Measures of International Consumption Risk Sharing. Ergys Islamaj June 2014 Abstract This paper investigates how output volatility and productivity correlations
More informationPublic Insurance against Idiosyncratic and Aggregate Risk: The Case of Social Security and Progressive Income Taxation
Public Insurance against Idiosyncratic and Aggregate Risk: The Case of Social Security and Progressive Income Taxation Dirk Krueger Goethe University Frankfurt, CEPR, CFS, MEA and NBER Mertonstr. 17, PF
More informationThe Cost of Financial Frictions for Life Insurers
The Cost of Financial Frictions for Life Insurers Ralph S. J. Koijen Motohiro Yogo University of Chicago and NBER Federal Reserve Bank of Minneapolis 1 1 The views expressed herein are not necessarily
More informationComparing return to work outcomes between vocational rehabilitation providers after adjusting for case mix using statistical models
Comparing return to work outcomes between vocational rehabilitation providers after adjusting for case mix using statistical models Prepared by Jim Gaetjens Presented to the Institute of Actuaries of Australia
More informationReal Business Cycle Models
Real Business Cycle Models Lecture 2 Nicola Viegi April 2015 Basic RBC Model Claim: Stochastic General Equlibrium Model Is Enough to Explain The Business cycle Behaviour of the Economy Money is of little
More informationWORKING PAPER NO. 11-18 PRIVATE EQUITY PREMIUM IN A GENERAL EQUILIBRIUM MODEL OF UNINSURABLE INVESTMENT RISK
WORKING PAPER NO. 11-18 PRIVATE EQUITY PREMIUM IN A GENERAL EQUILIBRIUM MODEL OF UNINSURABLE INVESTMENT RISK Francisco Covas Board of Governors of the Federal Reserve System and Shigeru Fujita Federal
More informationOptimal Social Insurance Design: UI Benefit Levels
Florian Scheuer 4/8/2014 Optimal Social Insurance Design: UI Benefit Levels 1 Overview optimal insurance design, application: UI benefit level Baily (JPubE 1978), generalized by Chetty (JPubE 2006) optimal
More informationHealth Insurance and Retirement Incentives
Health Insurance and Retirement Incentives Daniele Marazzina Joint work with Emilio Barucci and Enrico Biffis Emilio Barucci and Daniele Marazzina Dipartimento di Matematica F. Brioschi Politecnico di
More informationTail-Dependence an Essential Factor for Correctly Measuring the Benefits of Diversification
Tail-Dependence an Essential Factor for Correctly Measuring the Benefits of Diversification Presented by Work done with Roland Bürgi and Roger Iles New Views on Extreme Events: Coupled Networks, Dragon
More informationClass Notes, Econ 8801 Lump Sum Taxes are Awesome
Class Notes, Econ 8801 Lump Sum Taxes are Awesome Larry E. Jones 1 Exchange Economies with Taxes and Spending 1.1 Basics 1) Assume that there are n goods which can be consumed in any non-negative amounts;
More informationOptimal Unemployment Insurance with Sequential Search
Optimal Unemployment Insurance with Sequential Search Robert Shimer Department of Economics University of Chicago Iván Werning Department of Economics Massachusetts Institute of Technology July 16, 2003
More informationHow Much Insurance in Bewley Models? *
How Much Insurance in Bewley Models? * Greg Kaplan New York University gregkaplan@nyu.edu Giovanni L. Violante New York University, CEPR, and NBER glv2@nyu.edu First Draft: 12 February 2008 - This Draft:
More information