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Optimal redistribution: A life-cycle perspective

Jean-Baptiste Michau

Journal of Public Economics, 2014, vol. 111, issue C, 1-16

Abstract: In this paper, I characterize the optimal redistribution policy in a simple life-cycle framework with both an intensive and an extensive margin of labor supply. The extensive margin corresponds to the choice of a retirement age. The optimal allocation cannot be implemented in a decentralized economy by a standard non-linear income tax alone. It can however be implemented by a history-dependent social security system which redistributes resources across agents. A calibration of the model to the U.S. economy reveals that the retirement age should optimally be sharply increasing in productivity and that implementing the optimal life-cycle redistribution policy can generate large social welfare gains.

Keywords: Extensive margin; Optimal redistribution; Retirement age; Social security (search for similar items in EconPapers)
JEL-codes: E62 H21 H55 J26 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:111:y:2014:i:c:p:1-16

DOI: 10.1016/j.jpubeco.2013.12.010

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