 Endogenous longevity and optimal tax progressivityBurkhard Heer and Stefan Rohrbacher Journal of Health Economics, 2021, vol. 79, issue C Abstract: We study the impact of endogenous longevity on optimal tax progressivity and inequality in an overlapping generations model with skill heterogeneity. Higher tax progressivity decreases both the longevity gap and net income inequality, but at the expense of lower average lifetime and income. We find that the welfare-maximizing income tax is less progressive in our model with endogenous longevity than in our model with exogenous longevity. In a highly stylized calibration of the US economy, we show that optimal tax progressivity is less than what prevails under the current US tax system. Our results are robust to the range of empirical labor supply elasticity and the assumptions of missing annuity markets and stochastic health. Our conclusion for the optimal progressivity of the US tax system can be altered by the adoption of a more egalitarian welfare function or by increases in prevailing levels of wage inequality. Keywords: Health and inequality; Demography; Second-best; Optimal taxation; Personal income distribution; Overlapping generations (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:79:y:2021:i:c:s0167629621001004 DOI: 10.1016/j.jhealeco.2021.102515 Access Statistics for this article Journal of Health Economics is currently edited by J. P. Newhouse, A. J. Culyer, R. Frank, K. Claxton and T. McGuire More articles in Journal of Health Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.